MF Global Investor Lawsuit Against Brokers Makes Progress

Investors in bankrupt MF Global Holdings are hoping for final approval of a $74 million settlement relating to their lawsuit against a number of financial institutions.

In a filing made on Friday in Manhattan, attorneys for the plaintiffs asked a judge to approve the settlement, saying the agreement was “very favorable in light of the risks of continued litigation.”

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The brokerages named in the suit included units of Goldman Sachs, JPMorgan and Citigroup, and all served as underwriters involved in the sale of MF Global’s stocks and bonds before its bankruptcy. The deal has already received preliminary approval from the court, and “dismisses and releases” all claims against the institutions.

This case is just part of a larger lawsuit filed against MF Global, and parts of the suit not including these financial institutions will move forward whether the settlement is approved or not. Judge Victor Marrero will rule on the settlement at a hearing on June 26th.

More on MF Global bankruptcy

The investors, led by Virginia Retirement System, sued the brokerages as part of a 2011 suit against former MF Global CEO Jon S. Corzine and other execs, accusing them of not disclosing risks associated with bankrupt MF Global’s European sovereign debt trades based on repurchase-to-maturity transactions.

Not surprisingly, Corzine, an ex-Goldman Sachs chairman and former governor of New Jersey, has denied any wrongdoing, as have the other execs involved in the lawsuit.

MF Global petitioned for bankruptcy protection more than three years ago, after its bad bets on European sovereign debt became public. Investigators later concluded there was a $1.6 billion shortfall in customer accounts that were supposed to be segregated from MF Global’s funds.

Sufficient funds have been recovered to meet all valid customer claims, but the creditors of the MF Global Inc. brokerage and its parent will almost certainly never get all of their money back.