Mon, Nov 07, 2011 - Page 10 News List

MF Global faces class-action suits after bankruptcy


Two class-action lawsuits have been filed against bankrupt brokerage MF Global as customers struggle to recover funds from the first major US casualty of the European debt crisis.

On Saturday, Seattle-based Hagens Berman said it was “investigating whether the company used clients’ money to offset losses the company had incurred in failed investments.”

It filed a lawsuit in the name of investors who bought MF Global shares between May 20 and Oct. 28 or who bought bonds issued in August.

The complaint charged that MF Global “made false and misleading statements to investors, including failing to disclose the company’s reported internal control problems in segregating clients’ funds.”

Attorney Reed Kathrein said on Friday’s resignation of the company’s chief executive Jon Corzine, whose activities in the last weeks of the failing firm have attracted regulator scrutiny, was “not an encouraging sign.”

“As we continue our investigation, we hope to uncover whether the company mixed investors’ and company money, and if Corzine himself played a part in that -decision,” he added in a statement.

Boston law firm Block & Leviton said on Friday it had also filed a class-action lawsuit in New York federal court on behalf of MF Global clients over the same period.

It charged MF Global made “certain materially false and misleading statements regarding the company’s internal financial controls and liquidity levels” through its “most senior” officers and directors.

Investors lost some US$585 million in market capitalization in the week that preceded MF Global’s bankruptcy filings alone, according to Block & Leviton.

MF Global filed for bankruptcy on Oct. 31 after confidence in the company was shattered by a string of losses from European public debt holdings.

According to the bankruptcy filing and its third-quarter financial report, MF Global has 25,000 to 50,000 creditors and around US$40 billion in debts.

The company reported mounting losses related in part to a portfolio of US$6.3 billion in high-risk European bonds, which it had reportedly used as collateral to raise even more funding, much of it short-term.

This story has been viewed 2219 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top