On court hearings and court requests…

Judge Martin Glenn, who is overseeing the bankruptcy case from a Manhattan courtroom, “is clearly on the side of customers through this.  

"However, we believe the trustee (James Giddens) has substantial conflicts of interest through his relationships with various people in the creditor’s committee. And he has a natural conflict of interest since he’s earning $891 per hour. That provides very little incentive to close this up quickly.

“So, we started a legal arm that has put forth a couple of motions.

“The trustee began gathering assets and made a disbursement to some clients – it was a complete disaster in the second week (of the saga). He basically said ‘anyone who has positions, we’re going to transfer those positions to a new (Futures Commission Merchant) and 60 percent of the margin required to keep those positions viable.’

“That created 17,000 margin calls because not enough assets were transferred to hold the position. That caused people to send in new collateral or liquidate positions, regardless of whether they were hedges of cash positions or whatever.

“The trustee has two processes by which he can get money back to us: the bulk transfer process (where he sends out assets) or go through a formal claims process. The bankruptcy code requires a formal process, so we know eventually that will happen.

“The trustee proposed a really slow, arduous claims process where everything was done by U.S. mail. It didn’t take into account any of the efficiencies available in the futures industry.

“So, we filed a motion with the judge. He (told the trustee) ‘you’ve got to listen to these guys. They have experience in the industry.’ Well, the trustee adopted a few of our ideas and set up the claims process, which begins on Dec. 2.

“We’re still pushing for two things. First, we want to the trustee to agree – and get the bankruptcy court to agree – that commodity customers have a super priority lien over all the assets of MF Global. If our money wasn’t in our accounts, if it was moved somewhere else, that’s a crime. They’ve comingled funds and stolen the money. They have to pay it back.

“We’re not a creditor of MF Global. We didn’t invest in MF Global and lose money. They stole our property.

“So, we’re in the process of drafting several motions that would get the court to agree that, ‘yes, these people do have a super-priority lien. They can’t share in the loss with all the other creditors like JP Morgan.’ JP Morgan loaned them money. Well, that carries a different risk than someone who provided collateral they’re supposed to post on an exchange to back a trade.

“There’s a hearing on Dec. 5 where a group we’ve worked with will ask that 85 percent of the funds will be released. That was the shortfall before the trustee moved the goalposts. The shortfall was pegged at $600 million and that didn’t change until (the week of November 21) when the trustee said ‘well, it could be as high as $1.2 billion.’”