First, they can hope that the bankruptcy trustee for MF Global can find and repatriate the missing billion dollars. MF Global is the 8th largest bankruptcy in US history. Last week, customers received claim forms from the bankruptcy trustee. However, the bankruptcy trustee and investigators' public statements indicate that they believe the missing funds went overseas.
"It was recently reported that European and British customers of MF Global are likely to be made whole," Nygaard says. "Bankruptcy proceedings for MF Global in Europe and the U.K. are ongoing, and it is unlikely that funds will be voluntarily sent back to the U.S. bankruptcy proceeding. The customers overseas have been and are being compensated now. American investors and customers of MF Global have only received 72 percent of their funds and the MF Global bankruptcy trustee has not been optimistic that it will succeed where the FBI has failed."
Second, class actions have been filed on behalf of firm customers in federal court in New York. However, class actions generally take years to litigate, may or may not be certified as class actions, and generally settle for less than customers have lost. For those customers who need their funds for ongoing farming or businesses, they cannot afford to wait for extensive class-action litigation to be completed.
Therefore, the third alternative—filing an arbitration case against the persons who are liable for the firm's collapse and its missing $1.2 billion—is the best option. Nygaard, who represents farmers and traders of options and commodities through MF Global, and its predecessor firms, The Man Group, and Lind-Waldock, is filing arbitrations for such customers.
"Under the commodities statute applicable to Jon Corzine and the other executives of the firm, the 'control persons' of the firm are each individually liable for the wrongdoing of the firm," Nygaard says. "MF Global has errors and omissions insurance that will cover each of these persons in addition to their large personal fortunes. Jon Corzine, formerly the managing partner of Goldman Sachs and governor of New Jersey, has enormous personal assets."
Nygaard says the arbitration agreements she has reviewed for her MF Global clients contain arbitration clauses, which require that claims against the control persons proceed in arbitration, and she is representing groups of investors, as well as individual investors, in such proceedings.
Recovery for MF Global's failure to segregate its customers' funds, in accordance with customer agreements and the law, includes the money lost, plus the consequential damages and losses suffered if a business opportunity is missed. It can also include attorney's fees, interest, and, if a panel believes that fraud occurred, punitive damages. An arbitration panel can award all these types of damages, and any award must be paid within 30 days.