A U.S. federal court has ordered failed derivatives trading firm, MF Global Inc., to pay over US$1 billion in restitution to its former customers, who may have been harmed when the firm collapsed.
The U.S. Commodity Futures Trading Commission (CFTC) announced today that it has obtained a federal court consent order against MF Global requiring it to pay US$1.2 billion to ensure customers recover losses that were suffered when it failed in 2011. U.S. district court judge Victor Marrero also imposed a US$100 million civil monetary penalty on the firm, which is to be paid after it has fully paid customers and other creditors that have priority under bankruptcy law.
Earlier this year, the CFTC filed a complaint charging MF Global, and the other defendants, with unlawful use of customer funds during the last week of October 2011; among other charges. It alleged that the firm unlawfully used customers’ segregated funds to support its own operations, after it ran into financial troubles.
The CFTC says that, in the order, “MF Global admits to the allegations pertaining to its liability based on the acts and omissions of its employees”.
The regulator’s litigation continues against the remaining defendants: MF Global Holdings Ltd., its former CEO, Jon Corzine, and, former MF global employee, Edith O’Brien. The allegations against them have not been proven.
“Division staff have worked tirelessly to ensure that 100% restitution be awarded to satisfy customer losses. The CFTC will continue to ensure that those who violate U.S. commodity laws and regulations designed to protect customer funds will be vigorously prosecuted,” said Gretchen Lowe, acting director of the CFTC’s division of enforcement.