U.S. Bankruptcy Judge Martin Glenn has ruled that MF Global’s customers cannot have the brokerage’s bankruptcy converted to a Chapter 7 liquidation. He also denied a request by former MF Global commodity customer Sapere Wealth Management LCC to conduct their own probe into the collapse into the firm’s spectacular failure last October.
“The Justice Department, FBI, CFTC, SEC, SIPA Trustee, and Chapter 11 Trustee are all actively investigating the collapse of MFGI and MFGH,” explained Glenn. “Now is definitely not the time for discovery by private parties, such as Sapere.” He also said that the commodities firm failed to provide any reason that the case should be changed to Chapter 7. Customers will not be able to claim MF Global’s parent company’s assets before the investigation is complete.
In their initial filing, Sapere argued that customers should be paid in full before MF Global’s parent company gets any money, and advocated for the conversion of the firm’s Chapter 11 bankruptcy to a Chapter 7 liquidation. They alleged that the parent company had violated customer fund protection rules and should be liquidated. Then assets from the parent company could be distributed “on a first priority basis, ahead of all creditors, secured and unsecured.”