A federal judge rejected a request by Sapere Wealth Management LLC and two other plaintiffs to block former and current MF Global Holdings Ltd officials, including former Chief Executive Jon Corzine, from tapping as much as $30 million of insurance money to defend lawsuits over the firm’s collapse.
Judge Martin Glenn of the U.S. bankruptcy court in Manhattan on Monday refused to put the funds’ release on hold while the plaintiffs appeal his April 10 decision to let the executives to use the funds.
Many former customers of MF Global, which filed for Chapter 11 bankruptcy protection six months ago, believe the funds should be set aside for them and not go to individuals they hold responsible for the company’s demise.
“Settled case law…establishes that the individual insureds cannot be denied contractually provided insurance protection when their employers are insolvent because others may have claims on the insurance policies,” Glenn wrote in his order.
A lawyer for Sapere did not immediately respond to requests for comment.
In his April 10 decision, Glenn wrote that MF Global officials facing lawsuits would “suffer significant hardships” if they could not use the funds to finance their defense.
MF Global filed for Chapter 11 bankruptcy protection its $6.3 billion stake in European sovereign debt prompted concern over its ability to remain liquid.
About $1.6 billion of client funds remains missing, the trustee for the MF Global Inc brokerage unit has estimated. Corzine testified before the U.S. Congress in December that he did not know where the missing money is.