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From Securities Regulation Daily, July 15, 2016

Court grants preliminary approval of MF Global customer settlement

By Kevin Kulling, J.D.

A federal court has granted preliminary approval of a final class settlement involving former commodity futures customers of MF Global Inc. (MFGI) and individual defendants of the defunct firm, including former New Jersey governor Jon Corzine. The preliminary settlement would resolve customer interest claims, which constitute a portion of a larger multi district action against the former leading futures commission merchant (In re MF Global Holdings Ltd. Investment Litigation, July 13, 2016, Marrero, V.).

Settlement terms. The customer settlement establishes a fund of at least $2 million to be paid to former commodities customers. Based on the outcome of claims against certain individual defendants asserted by the CFTC, the customer settlement fund could increase to up to $5 million if the CFTC allocates additional amounts to customers. The settlement fund is to be divided among the customers pro rata based on the amount of each respective customer’s net equity claim as of March 14, 2014, the date of the final approval of the net equity settlement, according to the preliminary order.

The court said that based on its review of the settlement agreement, including consideration of the amount of the customer settlement fund, the court preliminarily approves the customer settlement as fair, reasonable and adequate, and in the best interest of the customer class.

Consolidated multi-district litigation. Currently pending in the Southern District of New York is a consolidated multi district litigation that includes this class action on behalf of former commodity customers of MF Global Inc. (MFGI) against certain former officers, directors and employees of MFGI and its parent company MF Global Holdings Ltd. The action is limited to claims for pre judgment interest and/or loss of use damages based on MFGI’s failure to return customers’ net equity deposits following its collapse in October 2011.

Pursuant to an October 2013 assignment that customers adopted in connection with a March 2014 settlement that advanced general estate funds of MFG sufficient to repay 100 percent of customers’ outstanding net equity, customers’ remaining interest in the litigation is limited to the customer interest claims against the individual defendants.

Request for approval. In its letter motion to the court, class counsel noted that the proposed $2 million to $5 million recovery for the customers was in addition to the prior 100 per cent recovery by customers from the net equity settlement.

Class counsel for the customers are not seeking an award of attorney fees and litigation expenses in connection with this portion of the settlement.

Hearing date. Customers in the class may exclude themselves from the customer settlement before September 2, 2016. The court has scheduled a hearing on the fairness of the customer settlement if necessary on September 16, 2016.

The case is No. 11-cv-7866.

Attorneys: Andrew J. Entwistle (Entwistle & Cappucci LLP), Co-lead counsel for commodity customer class. Andrew J. Levander (Dechert LLP) for Jon S. Corzine.

MainStory: TopStory CFTCNews CommodityFutures FraudManipulation NewYorkNews

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