MF Global trustee finds $1.6b claims fund gap

New York: The shortfall in funds available to pay back customers of MF Global's collapsed brokerage is at least $1.6 billion (Dh5.8 billion) and could be more, the trustee liquidating the brokerage said on Friday.

Until now, trustee James Giddens had estimated a shortfall of about $1.2 billion, although he also said most of the funds had now been tracked down — although recovering them from other entities may be protracted.

"The $1.2 billion number is history," Kent Jarrell, a spokesman for Giddens, told Reuters.

The latest figures provided marginally more clarity for MF Global's thousands of commodity futures customers, who are still missing about 28 per cent of their funds, although multiple variables could still cause the shortfall to rise or fall.

MF Global Holdings Ltd, the parent of the brokerage, filed for bankruptcy on October 31 amid fears about its exposure to risky European debt. In a report on Monday, Giddens said the firm's use of customer funds to cover corporate transactions led to a massive shortfall.

The new estimate for the size of that shortfall is broken down into two main components: roughly $700 million for customers who traded on foreign exchanges, the rights to which are in dispute with MF Global's UK entity; and about $900 million for customers who traded on domestic exchanges.

The estimate was reached through the processing of loss claims submitted by customers. Giddens is estimating a total of $6.9 billion in claims, $3.9 billion of which has already been paid back.

That leaves $3 billion outstanding. Giddens is keeping another $1.4 billion in reserve for now, yielding the estimated $1.6 billion gap.

But whether that gap represents a decrease or an increase from the trustee's previous $1.2 billion shortfall estimate proved a surprisingly complex topic.