HUGHES HUBBARD & REED LLP

One Battery Park Plaza

New York, New York 10004

Telephone: (212) 837-6000

Facsimile: (212) 422-4726

Attorneys for James W. Giddens,

Trustee for the SIPA Liquidation of MF Global Inc.

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re

MF GLOBAL INC.,

Debtor.

Case No. 11-2790 (MG) SIPA

TRUSTEE’S FIRST INTERIM REPORT FOR THE PERIOD

OCTOBER 31, 2011 THROUGH JUNE 4, 2012
i

TABLE OF CONTENTS

I. INTRODUCTION .......................................................................................................1

II. PROCEDURAL BACKGROUND .............................................................................3

III. FINANCIAL CONDITION OF ESTATE..................................................................3

IV. CLAIMS ADMINISTRATION.................................................................................3

V. ACCOUNT TRANSFERS..........................................................................................5

VI. MARSHALING OF CUSTOMER AND NON-SEGREGATED

UNALLOCATED PROPERTY...........................................................................9

VII. FORMER MFGI AFFILIATE MATTERS............................................................. 13

VIII. RETURN OF MISDIRECTED FUNDS................................................................ 16

IX. TRUSTEE’S INVESTIGATION............................................................................. 16

X. GOVERNMENT AND THIRD PARTY INVESTIGATIONS.................................. 17

XI. LITIGATION.......................................................................................................... 17

XII. DATA MANAGEMENT....................................................................................... 18

XIII. TAX MATTERS .................................................................................................. 19

XIV. EXECUTORY CONTRACTS.............................................................................. 20

XV. INTERNAL CONTROLS AND BOOKKEEPING ................................................ 20

XVI. PROFESSIONAL RETENTION .......................................................................... 21

XVII. COMMUNICATIONS WITH CUSTOMERS..................................................... 21

XVIII. REDUCTION OF REAL ESTATE, STAFF, AND OTHER 

ADMINISTRATIVE EXPENSES ..................................................................... 22

XIX. CONCLUSION .................................................................................................... 23
1

TO THE HONORABLE MARTIN GLENN,

UNITED STATES BANKRUPTCY JUDGE:

I. INTRODUCTION

The Trustee’s primary mission in the first seven months of this liquidation 

has been to process customer claims and return property to customers to the maximum 

extent possible through a combination of emergency bulk transfers and an expedited 

claims process, in accordance with the Orders and direction of this Court, and in 

consultation with SIPC, Congressional committees, the SEC, and the CFTC. Pursuant to 

the Court’s Orders, the Trustee has transferred to domestic commodity customers 72 

percent of the value of their property segregated pursuant to section 4d of the Commodity 

Exchange Act, and has transferred substantial portions (and in many cases all) of the 

securities accounts of former MFGI customers. The Trustee has now determined 

virtually all commodity claims and will, to the extent possible, shortly commence making 

interim distributions authorized by the Court to both 4d commodity customers and those 

former customers with claims for property secured in foreign depositories pursuant to 

17 C.F.R. § 30.7. The Trustee will also shortly complete issuing letters of determination 

on all securities claims, the bar date for which expired only on June 2, 2012.

The Trustee intends to make further distributions to the maximum extent

that the pools of segregated customer property or property allocated to those pools may 

permit. Before making further distributions, the Trustee must reserve for disputed 

claims. Presently, slightly more than ten percent of public commodity customer claims 

have not become final, and some of these are or may potentially be disputed. In addition, 

substantial claims for which the Trustee must reserve have been asserted by former 

affiliates of MFGI—primarily the Chapter 11 Debtors and the UK Administrators.
2

In addition to these contingencies, the pools of segregated property in the 

Trustee’s control are insufficient by a currently estimated $1.6 billion to permit a 100

percent distribution to former customers of MFGI. The primary cause of the shortfall in 

30.7 commodity customer property results from funds being held by the UK 

Administrators, which are the subject of litigation commenced in the UK courts

scheduled for trial in early spring of next year. A 100 percent distribution of 4d 

commodity customer property would require recoveries from third parties, as outlined in 

the Trustee’s Investigative Report, filed simultaneously with this Interim Report. Full 

distributions may well require allocation of currently non-segregated, unallocated 

property that the Trustee has been marshaling, as required by SIPA, the Commodity 

Exchange Act, and CFTC regulations.

The first seven months of this liquidation have been marked by extensive 

operational, administrative, and staffing demands. These demands included the account 

transfers, the claims process, the many motions and Congressional and regulatory 

requests made in the liquidation, and the investigation and analysis of what happened at 

MFGI and the extent of, and reason for, the shortfall in customer property. Many of 

these steps have been substantially completed in the first seven months of this liquidation. 

The Trustee is now taking steps to reduce accounting and other professional resources 

and support, and thereby reduce attendant expenses, and expects that the liquidation will 

proceed on a somewhat more routine, less exigent basis.
3

1. James W. Giddens (the “Trustee”), as trustee for the liquidation of MF 

Global Inc. (“MFGI”) under the Securities Investor Protection Act (“SIPA”), 15 U.S.C. 

§§ 78aaa et seq.,1

2. This Report covers the period from October 31, 2011 through June 4, 2012

(the “Report Period”). Concurrently with this Report, the Trustee is filing his Report of 

the Trustee’s Investigation and Recommendations (the “Investigative Report”), which 

provides information on the progress of the Trustee’s investigation into MFGI’s demise.

respectfully submits this First Interim Report (this “Report”) in 

accordance with the terms of the Order of the Court entered on November 23, 2011 (ECF 

No. 423), and pursuant to SIPA § 78fff-1(c).

3. This Report, along with a complete docket, regular progress updates, and 

substantial other information about this liquidation, may be found on the Trustee’s 

website, www.mfglobaltrustee.com.

II. PROCEDURAL BACKGROUND

4. On October 31, 2011 (the “Filing Date”), the Honorable Paul A. 

Engelmayer, of the United State District Court for the Southern District of New York, 

entered an Order (the “MFGI Liquidation Order”) pursuant to SIPA in the case captioned 

Securities Investor Protection Corp. v. MF Global Inc., Case No. 11-CIV-7750 (PAE).

5. The MFGI Liquidation Order, inter alia: (i) appointed James W. Giddens 

as Trustee for the liquidation of the business of MFGI pursuant to SIPA § 78eee(b)(3); 

(ii) appointed Hughes Hubbard & Reed LLP counsel to the Trustee pursuant to SIPA 

§ 78eee(b)(3); and (iii) removed the case to this Court as required for SIPA cases by 

SIPA § 78eee(b)(4) (the “SIPA Proceeding”).

III. FINANCIAL CONDITION OF ESTATE

6. Information relating to the financial condition of the MFGI estate is 

contained in Exhibit 1.

IV. CLAIMS ADMINISTRATION

7. The Trustee has sought to return customer property to customer claimants 

as quickly as possible by overseeing three bulk transfers within three months of the Filing 

Date and by expediting claims reconciliation so that substantially all timely commodity

customer claims—more than 26,000 claims—have been determined. For statistical data 

regarding the claims process, see Exhibit 2. The Court has now approved an interim 

distribution on allowed commodity customer claims (see ECF No. 1450), which the 

Trustee is in the process of implementing.

 

1. Subsequent references to SIPA throughout this Report will omit “15 U.S.C.” 
4

8. The Trustee has already distributed over $4 billion to former MFGI retail 

commodity customers who held segregated property by way of three Court-approved 

bulk transfers (see Section V.A, infra). In addition, the Trustee received Court approval 

to sell and transfer substantially all of the securities accounts at MFGI (see Section V.B, 

infra).

9. While effecting the bulk transfers, with the goal of returning customer 

property as promptly and efficiently as possible, the Trustee sought Court approval of and 

implemented a claims process in accordance with SIPA, the commodity broker 

liquidation provisions of chapter 7 of the Bankruptcy Code (11 U.S.C. §§ 761–767, the 

“Commodity Broker Liquidation Provisions”), and 17 C.F.R. §§ 190.01–190.10 (the 

“Part 190 Regulations”). The claims process was put into motion within weeks of the 

Bankruptcy Court’s Order of November 23, 2011 (the “Claims Process Order,” ECF No. 

423), which, among other things, approved the forms and procedures for filing, 

determining, and adjudicating claims. On December 2, 2011, in accordance with SIPA 

§ 78fff-2(a)(1) and 17 C.F.R. § 190.02(b)(4), 74,763 claims packages were distributed by 

mail to former MFGI customers and other potential claimants, and the claims forms were 

also posted on the Trustee’s website (www.mfglobaltrustee.com). The Trustee also 

published notice of the commencement of the claims process in The New York Times, 

Chicago Tribune, Financial Times, and The Wall Street Journal (see ECF No. 759).

10. The Trustee provided claimants with the option to file claims manually or 

electronically. Pursuant to SIPA § 78fff-2(a)(3), 17 C.F.R. § 190.02(d), and the Claims

Process Order, commodity customer claims and securities customer claims seeking 

maximum protection under SIPA must have been received on or before January 31, 2012. 

All claims must have been received by June 2, 2012; no claim of any kind will be 

allowed unless received by the Trustee on or before June 2, 2012.

11. The Trustee developed an efficient claims administration program to 

determine the validity of claims and their net equity in accordance with SIPA, the 

Commodity Broker Liquidation Provisions, and the Part 190 Regulations. The Trustee

has established a dedicated team of professionals who research and determine claims and 

provide regular progress reports to the Trustee.

12. The Trustee has also established two electronic claims registers online at 

the Trustee’s website (www.mfglobaltrustee.com)—a customer claims register and a 

general creditor claims register. Both registers provide the public access to all claims 

submitted in the SIPA Proceeding while providing appropriate protection for claimants’ 

personal information.

13. The Trustee’s goal and aspiration is to return as close to 100 percent of 

allowed net equity claims as possible for customer property while maximizing value for 

all creditors. However, the size and timing of distributions on customer claims remains 

dependent on the resolution of the major contingencies facing the Trustee, including 

matters pertaining to MF Global UK Ltd. and MF Global Holdings Ltd. (see Section VII, 

infra). A full distribution may also require successful litigation or negotiated resolution 

of claims against third parties and allocation of property from other sources to customer 
5

property as required by the Commodity Exchange Act, Commodity Futures Trading 

Commission (“CFTC”) regulations, and SIPA.

14. Because of the need to reserve for these contingencies, the Trustee is 

currently able to make only a partial distribution. To this end, on March 15, 2012, the 

Trustee filed his Motion to Approve First Interim Distribution for Allowed Commodity 

Futures Claims (the “First Interim Distribution Motion,” ECF No. 1086), which the Court 

approved on April 26, 2012 (the “First Interim Distribution Order,” ECF No. 1450), 

authorizing the Trustee to “take any and all actions reasonably necessary to consummate 

the distributions contemplated by this Order.” First Interim Distribution Order at 3. The 

Court-approved first interim claims distribution will be made on a rolling basis to those 

public customers who filed claims and have agreed with the Trustee’s determination of 

their claims, including the amounts and the classes of customer property underlying their 

claims. First Interim Distribution Motion at ¶ 19. Customers who object to any aspect of 

the Trustee’s determination of their claims will still be afforded their due process rights to 

have the Court hear their objections where the dispute cannot be resolved by mutual 

agreement without judicial intervention. Id. Ultimately, upon final resolution of a 

disputed claim, either by judicial order or negotiation, the claimant will be entitled to 

receive his or her pro rata share under the first interim claims distribution and any 

subsequent interim or final distributions. Id.

V. ACCOUNT TRANSFERS

A. Commodity Futures Customer Account Transfers

15. Within hours of commencement of this SIPA Proceeding, the Trustee 

began the unprecedented task of transferring MFGI’s former customers’ commodity 

futures accounts through three bulk transfers.

2

 Within days, the Trustee transferred 

approximately three million open commodity futures contracts, with notional values 

exceeding $100 billion, and associated clearing level margin for tens of thousands of 

accounts, or about 40 percent of the total futures market volume. Within eight weeks of 

the Filing Date, approximately $4 billion in customer margin had been transferred on a 

pro rata basis to nearly all former MFGI commodity futures customers,

3

 

2. These transfers pertained only to commodity futures transactions undertaken through U.S. exchanges 

governed under section 4d of the Commodity Exchange Act and related property (such trades and 

property, “Section 4d Property”). See 7 U.S.C. § 6d.

allowing these

former customers, during the eighth largest bankruptcy in United States history, to 

receive a seventy-two cent on the dollar recovery before they had even filed claims.

3. Not included in these transfers were commodity futures transactions on non-domestic exchanges. 

Persons trading in the United States through MFGI affiliates, as well as the affiliates themselves, and 

customers with accounts worth less than $1,000 were also not included in the FCM Account Transfers.
6

16. After seeking and obtaining Court approval for each, the FCM Account 

Transfers were accomplished in three phases: (1) the Position Transfer,4 (2) the CashOnly Transfer,5 and (3) the True-Up Transfer6

Physical Property Issues

(collectively, the “FCM Account 

Transfers”). Account transfers relating to former MFGI customers using letters of credit 

as margin for commodity futures trading activity were handled separately to avoid the 

undue burden on those customers that drawing on those letters of credit might have 

caused. Accounts holding physical property were also separately and specially handled 

as part of the True-Up Transfer, with transfers to those customers occurring continuously 

into March of 2012. 

17. The Part 190 Regulations contain special provisions addressing the 

treatment of warehouse receipts, bills of lading, or other documents of title to physical 

commodities (“Physical Property”) or specific categories of cash related to the 

acquisition or delivery of Physical Property held by the debtor FCM on behalf of its 

customers (collectively, “Physical Customer Property”).

18. Physical Customer Property is a subset of “customer property” as defined 

in 17 C.F.R. § 190.08(a), and all customer property may only be returned to customers on 

a pro rata basis, by account class. However, because of the nature of Physical Customer 

Property―that it cannot always be divided to allow for a pro rata distribution―the Part 

190 Regulations contain a procedure for the Trustee to offer the return of such indivisible 

Physical Customer Property, on an effective pro rata basis, as set forth in 17 C.F.R. 

§ 190.08(d)(1). Essentially, the account holder may either post 100 percent of the value 

and take full possession of the Physical Customer Property or may post a deposit with the 

Trustee in the amount to which the value of the Physical Customer Property exceeds the 

pro rata share of the customer’s distribution “plus a reasonable reserve in the trustee’s 

sole discretion.” 17 C.F.R. § 190.08(d)(1)(ii). Physical Customer Property not 

 

4. See Emergency Motion of James W. Giddens, Trustee for the Liquidation of MF Global Inc., for an 

Order Approving the Transfer of Certain Segregated Customer Commodity Positions and Extending 

the Trustee’s Authorization to Operate the Business of MF Global Inc. in the Ordinary Course 

(“Position Transfer Motion,” ECF No. 5); Order signed on November 2, 2011 Granting Emergency 

Motion of James W. Giddens, Trustee for the Liquidation of MF Global Inc., Approving the Transfer 

of Certain Segregated Customer Commodity Positions and Extending the Trustee’s Authorization to 

Operate the Business of MF Global Inc. in the Ordinary Course (“Position Transfer Order,” ECF No. 

14). 

5. See Expedited Motion of James W. Giddens, Trustee for the Liquidation of MF Global Inc., for an 

Order Approving Further Emergency Transfers and Distributions to Customers (“Cash-Only Transfer 

Motion,” ECF No. 193); Order Granting Expedited Motion of James W. Giddens, Trustee for the 

Liquidation of MF Global Inc., for an Order Approving Further Emergency Transfers and 

Distributions to Customers (“Cash-Only Transfer Order,” ECF No. 316).

6. See Expedited Motion to Approve Further Transfers and Distributions for MF Global Inc. United 

States Commodity Futures Customers (“True-Up Transfer Motion,” ECF No. 495); Order Granting 

Expedited Motion to Approve Further Transfers and Distributions for MF Global Inc. United States 

Commodity Futures Customers (“True-Up Transfer Order,” ECF No. 717).
7

reacquired from the estate must be liquidated, pursuant to 17 C.F.R. § 190.02(f) and 

§ 190.02(f)(2)-(3).

19. In an effort to expedite the return of Physical Customer Property, the 

Trustee sought and received Court approval to effect a pro rata distribution, 

corresponding to the True-Up Transfer. To implement this approved inclusion of 

Physical Property in the FCM Account Transfers, the Section 4d Property net liquidation 

value for each former customer was combined with the value of such customer’s Physical 

Customer Property. Physical Customer Property was distributed outright so long as the 

value of the Physical Customer Property did not exceed 72 percent of the combined net 

liquidation value. In the event that the Physical Customer Property did exceed 72 percent

of the combined net liquidation value, the customer was allowed to post a deposit, 

pursuant to 17 C.F.R. § 190.08(d), for the difference. The Trustee’s application to the 

Court, and the authority granted to him thereunder, expressly reserved the issue of 

creating a potentially separate account class for Physical Customer Property.

20. Ultimately, by motion dated March 15, 2012, the Trustee sought the 

Court’s approval for the identification and creation of a separate class of Physical 

Customer Property (a “Delivery Class”) and the Court approved the creation of such a 

class by Order dated April 26, 2012.7

21. On April 6, 2012, the Court granted the Trustee’s motion to approve the 

sale of the remaining Physical Property in the Trustee’s possession to complete effecting 

the True-Up Transfer (see ECF No. 1281). Shortly thereafter, the Trustee sold the 

remaining Physical Property and completed the True-Up Transfer and the FCM Account 

Transfer process generally.

 The identification and creation of this separate 

account class requires that the Trustee now separate the Physical Customer Property and 

Section 4d Property, and establish separate net liquidation values for each account class 

(and for each customer). 

B. Securities Customer Account Transfers

22. While the Trustee’s commodities team worked to effectuate expedited 

returns to commodity customers, the Trustee determined that transferring as many of 

MFGI’s non-affiliate securities customer accounts as possible to other members of the 

Securities Investor Protection Corporation (“SIPC”) would be in the best interests of the 

MFGI estate and would further the Trustee’s duty to return customer property as 

expeditiously as possible. In accordance with SIPA § 78fff-2(f), the Trustee obtained the 

prior approval of SIPC to sell, transfer, and assign such accounts, pursuant to an 

expedited solicitation process.

23. On November 4, 2011, the Trustee posted a Notice of Trustee Accepting 

Proposals for the Transfer of Customer Securities Accounts of MF Global Inc. (the 

 

7. Motion to Approve First Interim Distribution for Allowed Commodity Futures Claims (“First Interim 

Distribution Motion,” ECF No. 1086); Order Granting Motion to Approve First Interim Distribution 

for Allowed Commodity Futures Claims (“First Interim Distribution Order,” ECF No. 1450).
8

“Announcement”) on the MFGI docket (ECF No. 38) and the Trustee’s website, 

notifying prospective transferees of the opportunity to submit proposals for the transfer of 

MFGI securities customer accounts. That same day, the Trustee arranged through 

FINRA, the largest independent regulator of securities firms doing business in the United 

States, to have the Announcement distributed to the nearly 4,495 brokerage firms that 

FINRA regulates. In addition, the Trustee provided copies of the Announcement to 

companies that made inquiries about acquiring MFGI’s assets.

24. The Trustee received several inquiries in response to the Announcement. 

Six prospective transferees signed nondisclosure agreements in order to conduct due 

diligence. The Trustee established an electronic data room and arranged numerous 

diligence calls to explain the status of customer accounts and the transfer process.

25. Only a proposal received from Perrin, Holden & Davenport Capital Corp. 

(together with its clearing company Lek Securities Corporation, the “Transferee”) met the

requirements set forth by the Trustee. The transaction negotiated with the Transferee

resulted in the sale, transfer, and assignment of substantially all of MFGI’s customer 

securities accounts (the “Transferred Accounts”), except for (i) undersecured accounts 

(accounts with zero or negative net liquidation value), (ii) DVP/RVP accounts, (iii) 

accounts of any director, officer or five percent owner of MFGI or MF Global Holdings 

Ltd. (“MFGH”), (iv) subordinated accounts, and (v) all accounts of the affiliates of MFGI 

or MFGH.

26. By Order dated December 12, 2011, the Bankruptcy Court granted the 

Trustee’s motion as facilitating an expeditious return of securities accounts to MFGI’s 

former customers (ECF No. 718). Portions of 318 Transferred Accounts (having an 

aggregate value in cash and securities of approximately $237 million) were transferred 

pursuant to the Order. Because of an indemnification by SIPC, approximately 80 percent

of the 225 customer relationships with assigned Transferred Accounts realized a full 

return of their net equity claims within a few months of the Filing Date. The remaining 

customers received between 60 percent and 90 percent of their account value, depending 

upon the size of their accounts and their entitlement to SIPC protection. Notwithstanding 

the account transfers, all securities account holders maintained the right to file a formal 

proof of claim for any balance of securities or cash not transferred. 

27. The Trustee’s securities team is presently assisting with the reconciliation 

of securities customer claims which have been filed to date and the preparation of letters 

of determination. The amount and timing of further distributions awaited the receipt of 

claims through the bar date of June 2, 2012, and will depend upon the scope and 

magnitude of objections received in response to the Trustee’s letters of determination, 

which are expected to be issued on a rolling basis over the coming weeks. Substantial 

amounts are presently reserved for the claims of the Chapter 11 Debtors, which total 

approximately $556.5 million for securities claims; over the past month, the Trustee 

issued determination letters denying customer protection to these securities claims.
9

VI. MARSHALING OF CUSTOMER AND NON-SEGREGATED

UNALLOCATED PROPERTY

A. Accounts Established Under Trustee Control

28. Immediately upon commencement of the SIPA Proceeding, the Trustee 

established accounts with the trust group of Union Bank, N.A. (“Union Bank,” f/k/a

Union Bank of California, N.A.) to hold property marshaled by the Trustee for the 

various MFGI estates. These accounts were set up to accumulate cash and securities held 

by or for MFGI for its customers or for its own account. The prompt collection of MFGI 

property was necessary both to make it available for transfers and distributions to 

MFGI’s former customers and creditors and also to determine the exact amount of the 

shortfall of customer property.

29. Upon his appointment, the Trustee located and recovered MFGI 

property―whether FCM customer, broker-dealer customer, or non-segregated 

unallocated property. In the Report Period, the Trustee collected substantially all 

material U.S. dollar balances that were held in MFGI bank accounts at domestic banks. 

His efforts to collect remaining property of all types continues. The Trustee initiated, but 

has not yet completed, closure of all MFGI bank accounts that contained de minimis

dollar balances on the Filing Date. Major foreign currency balances in bank accounts 

outside the U.S. have also all been marshaled.

B. Recovery of Commodity Customer Property

30. In operation, MFGI’s FCM customer property was maintained at either 

DCOs or in segregated accounts, primarily at BMO Harris Bank N.A. (“Harris Bank”) 

and JPMorgan Chase Bank N.A. (“JPMC”).8

 

8. MFGI’s FCM also used, among others, US Bank, N.A. (“US Bank”), Wells Fargo Bank, N.A. (“Wells 

Fargo”), and the Royal Bank of Scotland (“RBS”), but at a significantly lesser volume than its primary 

banks.

 During the Report Period, the Trustee 

initiated and completed the FCM Account Transfers, as detailed in Section V.A, supra. 

With the Position Transfer complete in mid-November 2011, there was no longer a need 

to maintain customer property at the DCOs, and the Trustee sought and obtained its 

return. All customer property at DCOs as of the Filing Date that was not transferred to 

customers in the FCM Account Transfers is under the Trustee’s control at Union Bank. 

Property related to FCM customers’ trading on foreign futures exchanges was held at 

carrying brokers worldwide. In connection with the Trustee’s efforts to marshal these 

assets, the Trustee’s counsel sent letters to five carrying brokers and banks. As of the 

Report Date, two counterparties have agreed to return the assets, one has sufficiently 

shown that no assets were in MFGI’s account as of the Filing Date, and the Trustee’s 

counsel is in active negotiations with the other two to collect assets and close the 

accounts.
10

31. MFGI maintained its customer and non-segregated broker-dealer property 

at JPMC, the Depository Trust & Clearing Corporation and its subsidiaries (“DTCC”),9

32. Though the Trustee has been able to marshal considerable property, some

sums still have not been returned to the Trustee. The Trustee is aware of all unreturned 

property and has reserved his right to collect it from these holdouts. A majority of the 

property not recovered is in the form of cash or cash equivalents, but some of the value 

derives from exchange memberships. The paragraphs below summarize the results of 

recovery efforts at the exchanges, clearinghouses, and banks.

the Options Clearing Corporation (“OCC”), and the Bank of New York Mellon SA/NV 

(“BNYM”). JPMC was the bank and clearing broker for fixed income products. BNYM 

handled international fixed income and equity. Domestic equities were cleared through 

the various clearing subsidiaries of DTCC, while equity options were cleared through the 

OCC (where MFGI maintained a membership separate from its FCM membership). As 

described in Section V.B, supra, the Trustee initiated and completed transfers of brokerdealer customer accounts to a new broker-dealer and the remaining customer property has 

been or is being marshaled for return to former customers and creditors pursuant to SIPA.

C. CME Group Inc. (“CMEG”)10

33. MFGI property held or controlled by CMEG totals over $175 million. 

The Trustee’s and CMEG’s attorneys have been discussing a proposed resolution that 

should secure the satisfaction of claims and return and disposition of property in a 

manner that respects the interests of all interested parties, including customers. 

Assuming an agreement is concluded in the near future, it will be presented to the 

Bankruptcy Court for review and approval, with notice provided to all parties. CMEG 

and the Trustee are discussing the sale of MFGI’s seats and CMEG shares as components 

of any global resolution.

D. Other Exchanges

34. Virtually all property has been recovered from the International Exchange, 

the Options Clearing Corporation, the Kansas City Board of Trade, the Minneapolis 

Grain Exchange, New York Portfolio Clearing, and the International Derivatives Clearing 

House. There are accountings pending for relatively small amounts withheld or in the 

process of being returned to the Trustee.

 

9. These subsidiaries are: Depository Trust Company (“DTC”), National Securities Clearing Corporation 

(“NSCC”), and Fixed Income Clearing Corporation (“FICC”), which has both a Government Securities 

Dealer (“GSD”) division and a Mortgage Backed Securities (“MBS”) division.

10. Exchanges owed by CMEG are: CME, the Board of Trade of the City of Chicago, Inc. (“CBOT”), the 

New York Mercantile Exchange, Inc. (“NYMEX”), and Commodity Exchange, Inc. (“COMEX”). 

Together these are the “CME Exchanges.”
11

E. Depository Trust & Clearing Corporation

35. DTCC complied with the Trustee’s instructions to transfer customer 

property and securities, an amount valued at approximately $96 million on the Filing 

Date. Following discussions with the Trustee, DTCC more recently agreed to return the 

majority (approximately $40 million) of the non-segregated unallocated property it was

holding. The parties continue to discuss DTCC’s claims against the remaining amounts 

and a schedule for return of the final balance. 

F. JPMorgan Chase Bank, N.A.

36. On November 9, 2011, the Trustee requested that JPMC return property—

both customer and non-segregated unallocated assets—held in MFGI accounts at JPMC.

JPMC subsequently returned over $518 million of non-segregated unallocated assets and 

$89 million of customer assets.11

G. Bank of New York - Mellon

Return of the majority of MFGI non-segregated 

unallocated funds was made contingent upon the preservation of JPMC’s set off rights 

and security interests, including a return of $168 million on May 17, 2012, which was 

widely reported in the press. Affirmative claims which the Trustee is investigating and 

discussing with JPMC based on pre-Filing Date conduct are addressed in the 

Investigative Report.

37. In late December 2011, the Trustee began requesting that BNYM turnover 

to the Trustee or transfer MFGI assets (both customer and non-segregated unallocated 

assets) on deposit at BNYM (domestic and international). Owing in large measure to 

alleged competing claims of ownership over accounts from MF Global UK Ltd. and an 

alleged BNYM security interest in MFGI’s property, it was not until late February 2012 

that BNYM agreed to proceed with those transfers, which settled in mid-March.

38. Using Filing Date values, BNYM has returned, or transferred at the 

Trustee’s request, a total of $222 million. Customer property comprises $43 million of

this ($27 million to Lek Securities Corp. and $16 million to the Trustee). The Trustee 

recovered $179 million in non-segregated unallocated property. Other matters involving 

BNYM are addressed in the Investigative Report.

H. Other Banks

39. Harris Bank, RBS, US Bank, and Wells Fargo complied with the Trustee’s 

request for return of MFGI property in the weeks following the Filing Date, and have 

returned all funds in their accounts to the Trustee.

 

11. U.S. dollar value of assets determined using Filing Date values for securities and present date 

conversion rates for foreign currency.
12

I. Closeouts and Unwinds

40. The Trustee and his professionals have been working diligently on the 

recovery of value from the unwind of the financial products that were transacted at MFGI 

with broker-dealers, financial institutions, and other parties. These transactions include, 

but are not limited to, repurchase transactions, securities lending transactions, derivatives 

transactions, and to be announced (“TBA”) transactions. Many of these transactions 

were documented using the forms of Master Repurchase Agreement and Master 

Securities Lending Agreement of the Bond Market Association/Securities Industry and 

Financial Markets Association. The legal steps involved in the termination mechanics 

are thus well understood in the market and benefit from legal certainty. 

41. In addition, on November 15, 2011, the Trustee released protocols, which 

were developed in consultation with SIPC, to set forth a uniform process for terminating 

and closing out certain of these transactions that may be subject to the safe harbor 

provisions of the Bankruptcy Code (see 11 U.S.C. §§ 362(b)(6), (7), (17), (27), 546, 555, 

556, 559–562). The protocols set forth procedures for a counterparty (i) to terminate the 

transactions; (ii) to notify the Trustee of the manner and details of such termination; and 

(iii) if the counterparty owes MFGI a payment as a result of such termination, the 

instructions by which the counterparty should make payment.

42. To date, the Trustee’s efforts have resulted in the recovery of 

approximately $78.66 million of non-segregated unallocated assets, which represents the 

partial or full resolution of financial products transactions with approximately 10 

counterparties that owed termination amounts to MFGI.

43. The Trustee has established due diligence procedures for reconciling and 

collecting the close-out amounts due. These procedures include the following steps: (i) 

an analysis of MFGI’s books and records for the identification of trade population and a 

calculation of close-out amounts; (ii) a review of the relevant termination provisions of 

the agreement governing the transactions; (iii) a review of any applicable termination 

notice sent by the counterparty and an evaluation regarding the selection of valuation 

date; (iv) a review of the pricing and valuation data submitted by the counterparty; and 

(v) negotiations over any differences in valuation and/or methodology applied for 

purposes of valuation.

44. In addition to the counterparties who have reached out to the Trustee 

directly, the Trustee has identified a number of counterparties who owe amounts to MFGI 

as of the Filing Date, amounting to receivables between $50 million and $55 million in 

the aggregate. Following procedures similar to those described above, in the coming 

weeks, the Trustee will contact these counterparties to recover the amounts owed on a 

consensual basis wherever possible.
13

VII. FORMER MFGI AFFILIATE MATTERS

A. MF Global Holdings Ltd. Matters

45. The Trustee and his professionals have engaged in active discussions with 

the trustee (the “Chapter 11 Trustee”) for MFGH and its affiliated chapter 11 debtors 

(collectively, the “Chapter 11 Debtors”). Pursuant to these discussions, the Trustee’s 

professionals along with MFGI personnel have devoted hundreds of hours to producing 

data and documents voluntarily to the Chapter 11 Trustee, and answering questions posed 

by the Chapter 11 Trustee’s professionals in emails, conference calls, and in-person 

meetings.

46. To aid the Trustee’s investigation, the Trustee sought disclosure of 

documents in the possession of all current and former employees of the Chapter 11 

Debtors. The Chapter 11 Debtors initially refused to comply with the Trustee’s requests 

and sought to limit disclosure in terms of custodians and relevant time periods. The 

Chapter 11 Debtors and, later, the Chapter 11 Trustee after his appointment, also sought 

to prevent or delay disclosure of documents on the grounds that MFGH and the other 

Chapter 11 Debtors enjoyed legal privileges separate and apart from MFGI. Through 

several agreements with the Chapter 11 Debtors and the Chapter 11 Trustee, following 

his appointment, the Trustee eventually obtained access to the documents he sought.

47. Substantial amounts are presently reserved for the claims of the Chapter 

11 Debtors, which total approximately $110.3 million for commodities claims and 

approximately $556.5 million for securities claims. Over the past month, the Trustee 

issued determination letters denying customer protection to each of the securities claims.

The Trustee’s financial consultants took significant steps towards determining the 

commodities claims filed by the Chapter 11 Debtors. The Trustee anticipates that the 

remaining claims will be allowed as non-public customer claims.

48. The Trustee has not yet filed intercompany claims against the Chapter 11 

Debtors because no bar date has been established in their insolvency proceeding. The bar 

date for filing general creditor claims in the SIPA Proceeding was June 2, 2012 and these 

claims are being evaluated by the Trustee’s professionals.

B. MF Global UK Ltd. and Other Foreign Affiliate Matters

i. United Kingdom

49. MF Global UK Ltd. (“MFGUK”), based in London, was the principal 

European broker-dealer within MF Global. Prior to the Filing Date, there were extensive 

dealings between MFGI and MFGUK in the conduct of their businesses. MFGI, whether 

on its own behalf or on behalf of its underlying customers, traded futures and options 

outside the United States and Canada with or through MFGUK.

50. As a result of the insolvency of MFGUK, on October 31, 2011, certain 

partners of KPMG were appointed as the joint special administrators for MFGUK (the 

“JSAs”). Subsequent to their appointment, the Trustee and his professionals have worked 
14

extensively with the JSAs and their professionals in developing and sharing information 

about MFGI and MFGUK relevant to the administration of the respective estates. In 

addition, the Trustee has retained legal counsel in the United Kingdom.

51. On January 6, 2012, the Trustee filed informal client and creditor claims 

with the JSAs for voting purposes at the general meeting of MFGUK’s creditors. The 

Trustee’s claims were objected to by the JSAs, and admitted for voting purposes only. 

On January 9, 2012, the Trustee’s representatives attended the general meeting of 

MFGUK’s creditors and the Trustee was elected as a client representative to MFGUK’s 

creditors’ committee.

52. On February 24, 2012, the Trustee executed an Information Exchange 

Agreement and Protocol with the JSAs that was intended to provide a robust exchange of 

documents between the two office holders regarding the various claims each office holder 

intended to make in the other’s estate. Pursuant to this Protocol, the parties exchanged 

documents and information concerning their respective claims. That process officially 

concluded on March 31, 2012, although the parties continued to exchange information 

following that date.

53. On March 13, 2012, the Trustee filed an application in the English High 

Court for recognition of the SIPA Proceeding as a foreign main proceeding in accordance 

with the United Nations Model Law on cross-border insolvency. On March 27, 2012, the 

High Court granted the Trustee’s application and issued a recognition order. The 

Trustee believes that this recognition will facilitate the Trustee’s investigation of the 

insolvency of MFGI.

54. On March 30, 2012, pursuant to an agreement with the JSAs extending the 

Trustee’s time to lodge his formal client claim form, the Trustee submitted his client 

claim of approximately $911 million to the JSAs. This client claim includes 

approximately $700 million in property that should have been secured for former MFGI 

customers pursuant to 17 C.F.R. § 30.7 (“30.7 Property”). The client claim also includes 

$175 million transferred from MFGI to MFGUK on October 28, 2011, which originated 

from segregated customer funds in the U.S., and is further addressed in the Trustee’s 

Investigative Report. The Trustee’s position is that MFGI continues to be entitled to 

recover all 30.7 Property, whether on the grounds that the 30.7 Property constitutes client 

money or client assets, or on other grounds available under applicable regulatory rules 

and legal principles.

55. On May 25, 2012, the Trustee lodged his formal creditor claim of 

approximately $462.8 million to the JSAs. The Trustee and his professional advisors 

continue to engage in discussions with the JSAs regarding the extent to which the JSAs 

will allow the Trustee’s client and creditor claims. On June 1, 2012, counsel to the JSAs 

notified the Trustee’s counsel that the JSAs dispute the Trustee’s valuation and, 

specifically, the legal basis for that valuation. The JSAs propose to seek directions from 

the English High Court to resolve this dispute.
15

56. On May 3, 2012, at the urging of the Trustee, the JSAs made an 

application to the High Court seeking directions concerning whether the customer 

property that is the subject of the Trustee’s client claim was or should have been 

segregated under English law. The Trustee has pressed the JSAs to agree to a litigation 

timeline that will have this litigation concluded expeditiously. At a directions hearing on 

June 1, 2012, the High Court, at the Trustee’s urging for an early date, set the trial to 

begin on April 9, 2013.

57. The JSAs have also filed customer claims against MFGI, which, net of 

duplicate claims, assert approximately $258 million in commodities claims and $147

million in securities claims. The Trustee has issued letters of determination to the JSAs 

concerning all but one of these claims. The Trustee’s professionals continue to exchange 

information with the JSAs’ professionals concerning these claims.

ii. Canada

58. MF Global Canada Co. (“MFG Canada”) was the Canadian broker-dealer 

within MF Global. Prior to the Filing Date, there were extensive dealings between MFGI 

and MFG Canada in the conduct of their businesses. As a result of the insolvency of 

MFG Canada, certain partners of KPMG were appointed as the Trustees for MFG Canada 

(the “Canadian Trustees”). The Trustee and his professionals have worked extensively 

with the Canadian Trustees and their professionals in developing and sharing information 

about MFGI and MFG Canada relevant to the administration of the respective estates. In 

addition, the Trustee has retained legal counsel in Canada.

59. On January 31, 2012, the Canadian Trustees moved the Canadian Superior 

Court to determine the Trustee’s net equity claim under Canadian law. Although the 

Trustee had not yet lodged his formal claim at that time, the Trustee’s professionals had 

been in communication with the Canadian Trustees for some time and the parties had 

exchanged informal estimates of their claims. The Canadian Trustees’ motion sought a 

determination of the net equity of the Trustee’s claim and proposed to offset against the 

Trustee’s claim all claims that the Canadian Trustees had made in the MFGI estate. The 

Trustee disputed the Canadian Trustees’ proposal, as the bulk of both estates’ claims 

concerned customer omnibus accounts that MFGI and MFG Canada had held on behalf 

of each others’ customers.

60. On March 5, 2012, the Trustee made the following claims in the estate of 

MFG Canada: (i) a net intercompany receivable balance due to MFGI, as a creditor, of 

approximately $0.5 million; (ii) a claim by MFGI, on its own behalf, as a foreign futures 

customer of MFG Canada, of approximately $0.9 million; and, (iii) a claim by the 

Trustee on behalf of MFGI’s foreign futures and foreign options customers of 

approximately $103 million.

61. The Trustee and the Canadian Trustees have resolved their dispute without 

further litigation. A settlement agreement has been agreed to in principle between the 

Trustees, subject to approval by the Canadian Trustees’ inspectors, and the Trustee’s 

response to the Canadian Trustees’ motion has been accordingly adjourned by consent.
16

Under the terms agreed upon by the Trustees, approximately $62 million of customer 

property is scheduled to be returned to the MFGI estate upon approval of both the U.S. 

Bankruptcy Court and the Canadian Superior Court, and the Canadian Trustees will 

withdraw their claims in the MFGI liquidation.

iii. Other Former Affiliates

62. Several other former affiliated companies of MFGI have submitted

customer claims. The Liquidator of MF Global Australia Limited filed commodities 

claims of approximately $15 million and securities claims of approximately $3 million. 

The Liquidator of MF Global Holdings HK Limited filed commodities claims of 

approximately $9 million and securities claims of approximately $0.003 million. Net of 

duplicates, the Liquidators of MF Global Singapore Pte. Limited filed commodities of 

approximately $13 million and securities claims of approximately $0.4 million. Letters 

of determination concerning each of these claims have been sent to the respective 

administrators. There appear to be no material disputes concerning these claims.

VIII. RETURN OF MISDIRECTED FUNDS

63. Shortly after the Filing Date, the Trustee began receiving reports of funds 

being sent to MFGI bank accounts in error, including funds intended for the benefit of 

parties that were previously MFGI customers, but whose accounts were transferred after 

the Filing Date (“Misdirected Wires”). In the normal course of business, financial 

institutions can recall funds sent in error with relative ease. However, because MFGI is 

in liquidation under SIPA, before returning any Misdirected Wires, the Trustee must

investigate the underlying transfers and confirm that the funds were in fact sent in error 

and are not the property of the MFGI estate. 

64. To facilitate the return of Misdirected Wires and to increase the overall 

efficiency of responding to requests for such returns, in November 2011, the Trustee 

implemented certain Court-authorized procedures (see ECF No. 417, the “Misdirected 

Wires Order”). The Trustee has also closed most of the bank accounts identified as 

having received Misdirected Wires, thereby reducing future requests for Misdirected 

Wire returns. To date, the Trustee has returned approximately $15 million in misdirected 

wires. For additional information on the Misdirected Wire procedures, see the 

Misdirected Wires Order or the Trustee’s website (www.mfglobaltrustee.com).

IX. TRUSTEE’S INVESTIGATION

65. The Trustee has the specific and important duty to conduct an 

investigation and prepare a report concerning “the acts, conduct, property, liabilities, and 

financial condition of [MFGI], the operation of its business, and any other matter, to the 

extent relevant to the liquidation proceeding.” 15 U.S.C. §78fff-1(d). In furtherance of 

this duty, the Trustee obtained authority from the Court by Order dated November 4, 

2011 to issue subpoenas (see ECF No. 34), and since then has been actively engaged in 

pursuing numerous avenues of investigation.
17

66. The first of the Trustee’s investigative reports, his Preliminary Report on 

Status of His Investigation and Interim Status Report on Claims Process and Account 

Transfers (the “Preliminary Report,” ECF No. 896), was completed and issued on 

February 6, 2012. The Preliminary Report addressed the broad topics of (i) what 

happened during the final days of MFGI; (ii) parties that were the immediate recipients of 

transfers from MFGI during the final days and weeks of operation; and (iii) an initial 

assessment of the factors that contributed to the deterioration of MF Global’s liquidity 

position. 

67. Concurrently with this Report, the Trustee is filing his second 

Investigative Report with the Court.

X. GOVERNMENT AND THIRD PARTY INVESTIGATIONS

68. The flow of requests to the Trustee for historical MFGI information from 

dozens of federal, state, and local government agencies continues. Cooperation with 

investigations by these agencies is of paramount importance to the Trustee and SIPC. In 

addition, the Trustee has received and is responding in due course to an ever-increasing 

number of non-party subpoenas issued in connection with various litigations and 

arbitrations across the United States. Together, the Trustee has responded to over 260 

governmental and non-party requests for MFGI documents and information, and those 

requests continue and are expected to continue for the foreseeable future. 

Notwithstanding an appreciation for regulators’ and litigants’ need for MFGI historical 

information, the productions continue to be a significant expense and drain of resources.

Regulatory Matters

69. As a result of the complexities of administering MFGI’s estate, the Trustee 

regularly meets and coordinates with the SEC, the Federal Reserve Bank of New York, 

the CFTC, FINRA, and the British Financial Services Authority. The Trustee is also 

terminating MFGI’s former broker-dealer registrations with federal regulatory agencies, 

including the SEC and the National Futures Association, saving the MFGI estate from the 

costs associated with maintaining its registration status.

XI. LITIGATION

70. On the Filing Date, MFGI was party to several litigation proceedings in 

Illinois state court. Accordingly, the Trustee oversaw the filing in these cases of notices 

of the commencement of the SIPA Proceeding and the effect of the automatic stay 

provisions of 11 U.S.C. § 362 and the MFGI Liquidation Order (together, the “Automatic 

Stay”). Though the Automatic Stay does not apply to proceedings brought by MFGI, any 

counterclaims in such a proceeding are subject to the Automatic Stay. The Trustee may 

continue to pursue a few affirmative litigations, including an action commenced on May 

21, 2009, New Hampshire Ins. Co., et al. v. MF Global Inc., which existed prior to the 

initiation of the SIPA Proceeding. This claim involves insurance coverage for the 

“Dooley Incident” of unauthorized trading referenced in the Investigative Report.
18

71. Before this Court, the Trustee has had to oppose a number of motions 

seeking varied relief, including, among others, the extension of the bar date for 

commodity customers (ECF Nos. 925, 994), private party discovery (ECF Nos. 948, 

993), and to compel the Trustee to avoid using futures commission merchants and 

derivatives clearing organizations (ECF Nos. 949, 996). Additionally, the Trustee 

continues to defend against, as one of several named defendants, an adversary proceeding 

commenced by a class of former employees of various MF Global entities who allege 

violations of the Federal and New York State Worker Adjustment Restraining and 

Notification (“WARN”) Acts, which require an employer to give 60 days and 90 days 

notice, respectively, of a plant closing or mass layoffs (Case No. 11-2880, ECF No. 42).

XII. DATA MANAGEMENT

72. For purposes of his investigation, as well as to respond to the numerous 

requests from legislators, law enforcement agencies, and regulators, the Trustee has 

undertaken extensive efforts to collect and preserve MFGI documents, data, and other 

information.

73. Immediately following the commencement of the SIPA Proceeding, the 

Trustee deployed a team of professionals, including attorneys experienced in brokerdealer liquidations and expert consultants and forensic accountants from both Deloitte 

and Ernst & Young, to secure all MFGI premises, data, books, and records. 

74. The preservation team was on the ground not only in New York and 

Chicago, but also five other locations across the U.S. to ensure that electronic data was 

preserved, systems and key hardware were maintained, and hard copy documents were 

secured.

75. As part of this effort, the Trustee’s professionals have, inter alia:

• Imaged nearly 975 desktop computers and laptops used by former 

MFGI employees;

• Collected an additional 2,300 hard drives from computers used by 

former MFGI employees;

• Collected and stored over 400 servers;

• Imaged over 100 third-party servers that contained MFGI data;

• Imaged or stored approximately 400 Blackberries;

• Exported key data systems;

• Collected and stored over 8,500 boxes of hard copy documents from 

MFGI’s offices.
19

76. All told, the amount of information preserved to date amounts to over 100 

terabytes of data, the equivalent of approximately one-third of the contents of the Library 

of Congress.

77. In addition to the efforts to preserve documents and data that had been 

located in MFGI offices, the Trustee has also sent preservation notices to over 50 third 

parties and individuals, instructing them to preserve all MFGI documents and information 

in their possession. 

XIII. TAX MATTERS

78. The Trustee’s professionals are monitoring and responding to federal and 

state tax audits, coordinating responses to requests for tax-related information from 

federal and state authorities, and ensuring compliance with tax reporting requirements.

A. 1099 and Related Reporting

79. All required Forms 1099 for 2011 have been timely mailed to recipients 

and filed with the IRS. All Forms 1042-S required to be sent to foreign customers have 

been mailed to recipients; the summary and transmittal of such Forms 1042-S, made on 

Form 1042, will be filed with the IRS before September 15, 2012 (the deadline under a 

timely filed extension request). The Trustee has established a call center to answer 

customers’ questions regarding these Forms; the toll-free call center number was printed 

on all Forms 1099 and Forms 1042-S, and appears on the Trustee’s website. 

80. All required Form W-2 reporting was timely completed by shared 

employees of MFGI and MFGH.

B. The MF Global Consolidated and Combined Groups

81. As of its tax year commencing April 1, 2011, MFGI is included in the 

consolidated federal income tax returns filed by the affiliated group of which MFGH is 

the common parent. For tax years prior to April 1, 2011, MFGI was similarly included in 

consolidated returns, but the common parent of the group in those years was MF Global 

Holdings USA, Inc. (“MFGH USA”). MFGH USA and the other members of the former 

MFGH USA group are currently included in the MFGH consolidated group. Under 

applicable U.S. Treasury regulations, the common parent of a federal consolidated group 

is the sole agent for the consolidated group and has authority to act with respect to all 

matters relating to the federal income tax liability of itself and the members of the group, 

including audits and refund claims. All members of the group are severally liable for all 

of the group’s federal income tax liability for all periods during which they are members 

of the group. MFGI is a member of similar groups for purposes of income or franchise 

taxes in several states and cities, including New York State and New York City. Such a 

group is generally referred to for state law purposes as a “combined group;” a combined 

group files a combined return. The Trustee, with the help of his tax professionals, is 

analyzing the potential benefits to the MFGI estate that would result from MFGI’s 

disaffiliation from the consolidated groups and “decombining” for New York State and 

City purposes.
20

C. Tax Audits and Refund Claims

82. The MFGH USA consolidated group was under federal income tax audit 

for its tax years 2007 to 2011 before the commencement of the SIPA Proceeding. On 

November 19, 2011, the group filed a federal refund claim for approximately $22 million 

based on carryback of a net operating loss. The refund has not, as yet, been allowed. The 

audit is currently suspended while the IRS seeks the approval of the Joint Committee on 

Taxation to proceed.12

83. In addition, the IRS has assessed penalties against MFGI for years 2004 to 

2008, totaling $1 million or less, that relate to errors on certain information returns. The 

Trustee’s professionals are working with a former MFGI employee to seek abatement of 

these penalties.

84. The Trustee’s professionals maintain ongoing discussions with MFGH and 

representatives of MFGH as to the status of several audits and refund claims, and for 

purposes of exchanging information as needed to assist with tax compliance. With 

respect to all refund claims, the Trustee’s professionals are evaluating MFGI’s 

entitlement to a share of refunds (any checks generally would be issued to the relevant 

parent company in the first instance as a matter of tax law).

XIV. EXECUTORY CONTRACTS

85. Since the Filing Date, the Trustee’s professionals have undertaken 

extensive analysis to ascertain whether MFGI executory contracts and unexpired leases 

would be beneficial to the MFGI estate and further the purposes of the liquidation or 

should be noticed for rejection for cost-savings. To date, the Trustee has noticed over

400 executory contracts, eliminating several million dollars of administrative expense. In 

order to conduct this review, the Trustee has sought and this Court has approved an 

extension of the time within which the Trustee may assume, assign, or reject MFGI 

executory contracts and unexpired leases, as provided in section 365(d)(1) of the 

Bankruptcy Code, to, and including, July 30, 2012 (see ECF No. 1533). Currently, the 

executory contract review work is nearly complete.

XV. INTERNAL CONTROLS AND BOOKKEEPING

86. The Trustee continues to employ professionals who oversee the 

performance of the major efforts and work-streams, provide guidance and review 

functions related to marshaling assets, assist with information and technological needs, 

support MFGI’s operations, and provide consultative advice on various matters. The 

Trustee and his professionals continue to monitor MFGI’s non-segregated unallocated

assets, including soliciting and/or evaluating bids for such assets.

87. The Trustee’s professionals have established certain daily, monthly, and 

ad hoc practices to support the continuous processing of MFGI’s former business

 

12. Joint Committee approval is required because of the size of the claimed refund.
21

appropriate to the nature of the liquidation, though they are not comparable to that of an 

entity operating as a going concern.

XVI. PROFESSIONAL RETENTION

88. At the request of and in consultation with SIPC, nearly every professional 

firm and consultant retained by the Trustee, including the undersigned, has agreed to a 

voluntary “public interest discount” of ten percent or more from standard rates and has 

further agreed not to charge for a number of categories of expenses regularly paid to 

professionals in large bankruptcy proceedings, including overtime meals, internal copies,

and after-hour travel services.

89. On February 9, 2012, the Court entered the Order Authorizing 

Employment of Haynes and Boone, LLP as Special Counsel, Nunc Pro Tunc to January 

9, 2012 (ECF No. 903). Haynes and Boone has begun advising the Trustee on matters 

related to PricewaterhouseCoopers LLP (MF Global’s auditors). 

90. Given the global nature of MFGI’s business and that MF Global 

insolvency proceedings have been commenced in numerous jurisdictions, the Trustee 

requires additional counsel to attend to certain matters. On February 9, 2012, the Court 

entered the Order Authorizing the Trustee to Retain and Employ Slaughter and May as 

English Counsel, Nunc Pro Tunc to December 21, 2011 (ECF No. 902). Slaughter and 

May is advising as to the Trustee’s and the MFGI estate’s rights, duties, and powers in 

connection with the MFGUK Special Administration (see Section VII.B.i, supra). The 

Trustee also retained Blake, Cassels, Graydon LLP, pursuant to Order Authorizing 

Employment of Counsel Utilized in the Ordinary Course (see ECF No. 906, Declaration 

of Disinterestedness of Linc A. Rogers on Behalf of Blake, Cassels, Graydon LLP), to 

serve as his Canadian counsel in connection with the MF Global Canada proceeding (see 

Section VII.B.ii, supra).

XVII. COMMUNICATIONS WITH CUSTOMERS

91. The Trustee has continued to maintain channels of communication with 

customers, creditors, and the public to the extent that he can do so without detracting 

from his duties to marshal and return property, and without compromising the 

confidentiality of investigatory and recovery efforts.

92. The Trustee’s website (www.mfglobaltrustee.com) is frequently updated 

with reports on the progress of the liquidation, statements on various issues, and court 

filings. The Trustee has also organized a call center with a standby roster of attorneys to 

answer inquiries quickly and address concerns where possible. To date, the Trustee’s 

professionals have responded to over 16,000 inquiries through the general call center. 

Additionally, the Trustee’s professionals have now established two specialized call 

centers dedicated to inquiries relating to claims determinations and tax matters.

93. The Trustee or his lead counsel have also voluntarily appeared before 

Congress, upon request, four times, in addition to participating in conference calls and 

meetings with Congressional staff and constituents. Finally, the Trustee has previously 
22

filed or delivered orally to the Court several reports relating to his investigation, the 

claims process, and the general status of the liquidation (see ECF Nos. 835, 896, 977).

XVIII. REDUCTION OF REAL ESTATE, STAFF, AND OTHER

ADMINISTRATIVE EXPENSES

94. As of the Filing Date, MFGI was the named tenant under ten real property 

leases. The Trustee promptly rejected and/or surrendered eight of the ten real property 

leases as of November 1, 2011 for office space in New York, Chicago, Boston, San 

Francisco, Dallas, Washington, D.C., and Kansas. With respect to one of the two 

remaining real property leases in Chicago, the Trustee was successfully able to negotiate 

for partial surrenders of space in order to maintain necessary operations for the wind 

down of MFGI’s business. The final portion of the space at the Chicago location was due 

to be surrendered by the end of May 2012. The last real property lease was set to be 

rejected by the end of May 2012. The savings resulting from the rejection of all MFGI 

real property leases is, in the aggregate, approximately $118 million.

95. All lease terminations and negotiations for occupancy beyond lease 

terminations were conducted in a manner that has enabled the Trustee to preserve all 

physical and electronic records and to maximize recovery for the disposition of personal 

property. 

96. The Trustee has also entered into a lease for office space in New York 

City, which is used to conduct his operations.

97. Under the Trustee’s supervision, the MFGI estate has greatly reduced its 

employees and corresponding payroll. On October 31, 2011, MFGI employed 1,312 

employees. Payroll and payroll taxes for the pay period ending October 31, 2011 totaled 

$15,675,216. The Trustee hired several hundred former MFGI or MFGH employees on a 

temporary basis to provide necessary assistance. As of May 15, 2012, this number was 

reduced to 19 employees. Payroll and payroll taxes for the pay period ending May 15, 

2012 totaled $274,148.57.

Winding Down the Chicago Office

98. Prior to the liquidation, approximately 600 employees worked in MFGI’s 

Chicago offices (collectively the “Chicago Office”), carrying out a variety of core FCM 

functions including sales, margining, client relations, and IT support. The Chicago 

Office was also the central location for MFGI’s accounting and treasury operations. 

99. Immediately after the liquidation commenced, on November 1, 2011, the 

Trustee sent a small team of lawyers to Chicago, Illinois, to liquidate MFGI’s Chicago 

Office and assist in customer transfers and other projects. In less than five months, the 

Trustee’s team unwound Chicago operations, vacated and consolidated Chicago real 

estate, and assisted with all aspects of the liquidation.

100. Since MFGI was no longer operating, the Trustee terminated all Chicago 

(and New York) employees as of November 15, 2011. Starting that same day, the 
23

Trustee retained a skeletal staff of 90 former MFGI Chicago employees for a period of 

three months to assist with the liquidation. At the end of the three months, the Trustee 

retained 35 of the former MFGI staff for an additional two months. Thereafter, the 

Trustee retained one former MFGI Chicago employee, a facilities manager, who assisted 

with the final close of the Chicago Office and disaster-recovery site outside Chicago.

Additional Reduction of Expenses

101. As noted above, the Trustee is taking other steps to reduce professional 

staffing and administrative expenses commensurate with the reduced scope of the 

liquidation now that many expedited activities have been completed or substantially 

progressed.

XIX. CONCLUSION

102. The foregoing report represents a summary of the status of this SIPA 

Proceeding and the material events that have occurred from October 31, 2011 through 

June 4, 2012. It will be supplemented and updated with further interim reports.

Dated: New York, New York

June 4, 2012

Respectfully submitted,

HUGHES HUBBARD & REED LLP

By: /s/ James B. Kobak, Jr.

A member of the firm

One Battery Park Plaza

New York, New York 10004

Telephone: (212) 837-6000

Facsimile: (212) 422-4726

Attorneys for James W. Giddens,

Trustee for the SIPA Liquidation of

MF Global Inc.
EXHIBIT 1
The information and data included in this exhibit are derived from sources available to the Trustee and his professionals. This exhibit is based on the information available at 

this time. All amounts are unaudited and subject to revision. 

Financial Condition of the Estate:

Commodity Customer Property Pools

Description

Amount in US Dollars in Millions

(as of April 27, 2012)

4d Commodity 

Customers

30.7 Commodity 

Customers

Delivery Class 

Customers

Amount of Claims Filed $ 8,6051 $ 1,162 $ N/A2

Estimated Obligations from MFGI Books and Records 6,007 866 107

Assets Marshaled to Date 5,2243 90 121

Assets Transferred or Distributed 4,061 _ 90

Assets Remaining 1,163 90 31

1. This amount does not include a $150 trillion asserted claim that was filed late, has no support in MFGI’s books and records or on its face, and that the Trustee has 

moved to expunge (ECF No. 1785).

2. Delivery Class Customers asserted claims relating to Physical Customer Property in terms of that property (e.g., five gold certificates), not in a dollar amount.

3. This amount reflects certain changes to valuation methodologies and other adjustments since the filing of the Trustee’s Sixty Day Report on January 12, 2012 (ECF No. 

835).

4. As of April 27, 2012, the Trustee had received approximately $1.4 billion in securities claims, excluding a $49.1 billion asserted claim that has no basis in MFGI’s books 

and records or on its face, and that the Trustee has moved to expunge (ECF No. 1785).

The bar date for filing securities4 and general creditor claims was June 2, 2012 and these claims are being 

evaluated by the Trustee’s professionals. 
The information and data included in this exhibit are derived from sources available to the Trustee and his professionals. This exhibit is based on the information available at 

this time. All amounts are unaudited and subject to revision. 

Financial Condition of the Estate:

Overview of Non-Segregated Unallocated Assets

Summary of Non-Segregated Unallocated Assets as of April 27, 2012

Unaudited (in Millions)

Cash and Cash Equivalents $ 494

Securities 528

Total Non-Segregated Unallocated Assets on Hand $ 1,022

The Trustee believes a significant portion of these assets will need to be allocated to commodities and 

securities customers at a future date under principles and in amounts that will be established by

motion subject to Court approval.
EXHIBIT 2
The information and data included in this exhibit are derived from sources available to the Trustee and his professionals. This exhibit is based on the information available at 

this time. All amounts are unaudited and subject to revision. 

Overview of the Claims Process

Commodity Customer Claims

(as of June 1, 2012)

Total Timely Claims Asserted 26,792

 Claims Allowed 25,619

 Claims Denied 608

 Claims Reclassified 73

Total Determined Claims1 26,300

 Claims Determined and Final 23,277

 Claims Still Subject to Objection 2,839

 Objected to Claim Determinations 184

Letters of Determination Sent2 23,869

1. Of the 492 commodity customer claims not yet determined, 217 relate to foreign accounts and could not be determined because of the absence of financial 

information needed from the joint special administrators for MF Global UK Ltd. to value open foreign futures contracts at their liquidation.

2. The number of letters of determination sent is lower than the number of claims determined because some of the claims are duplicative of other claims and therefore 

do not require separate letters of determination.

The bar date for filing securities and general creditor claims was June 2, 2012 and these claims are being 

evaluated by the Trustee’s professionals.