JPMorgan Chase has agreed to a deal that will return US$546 million to former customers of trading firm MF Global Holdings Ltd, which collapsed in 2011 with US$1.6 billion missing from its accounts.
MF Global failed in October after a calamitous bet on European debt spooked its investors, partners and clients. The bankruptcy was the eighth-largest in the US and the largest on Wall Street since the 2008 collapse of Lehman Brothers.
Much of the missing money belonged to farmers, ranchers and other business owners who used MF Global to reduce their risks from fluctuating prices of commodities such as corn and wheat. A US House of Representatives panel has said credit rating agencies and federal regulators contributed to MF Global’s collapse.
However, it pinned most of the blame on risky strategies by former chief executive officer Jon Corzine, the former New Jersey governor.
JPMorgan Chase & Co held MF Global funds in several accounts and also processed the firm’s securities trades. The trustee tasked with getting customers’ money back, James Giddens, threatened to sue the New York bank if it did not return money that was transferred to the bank from MF Global. By June last year, JPMorgan had returned US$608 million to the firm.
Under a settlement agreement filed on Tuesday in Manhattan bankruptcy court, JPMorgan Chase has agreed to pay US$100 million to reimburse customers and will relinquish claims on US$417 million that it previously returned.
JPMorgan also will return over US$29 million that it is holding as security on an MF Global credit line. The recovered money will eventually be passed along to customers.
The deal must be approved by Bankruptcy Court Judge Martin Glenn and District Court Judge Victor Marrero.