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 SECOND SIX MONTH INTERIM REPORT FOR THE PERIOD

JUNE 5, 2012 THROUGH DECEMBER 4, 2012
i

I. INTRODUCTION............................................................................................................

TABLE OF CONTENTS

1

II. PROCEDURAL BACKGROUND.................................................................................4

III. FINANCIAL CONDITION OF THE ESTATE............................................................4

IV. CLAIMS ADMINISTRATION.....................................................................................5

V. MARSHALING OF CUSTOMER AND NON-SEGREGATED

UNALLOCATED PROPERTY ............................................................................11

VI. FORMER MFGI AFFILIATE MATTERS.................................................................14

VII. RETURN OF MISDIRECTED FUNDS....................................................................18

VIII. TRUSTEE’S INVESTIGATION..............................................................................18

IX. GOVERNMENT AND THIRD PARTY INVESTIGATIONS ..................................19

X. LITIGATION................................................................................................................19

XI. DATA MANAGEMENT ............................................................................................21

XII. TAX MATTERS ........................................................................................................22

XIII. EXECUTORY CONTRACTS..................................................................................23

XIV. INTERNAL CONTROLS AND BOOKKEEPING .................................................23

XV. PROFESSIONAL RETENTION...............................................................................24

XVI. INSURANCE............................................................................................................24

XVII. COMMUNICATIONS WITH CUSTOMERS........................................................26

XVIII. REDUCTION OF ADMINISTRATIVE EXPENSES...........................................26

XIX. CONCLUSION.........................................................................................................27
1

TO THE HONORABLE MARTIN GLENN,

UNITED STATES BANKRUPTCY JUDGE:

I. 

The six months represented by this Report have witnessed the substantial 

completion of several major facets of this liquidation. But the Report also marks the 

beginning of a critical phase of negotiation and potential litigation, which may determine 

the timing and extent of further distributions, as well as define the parameters of the size 

and extent of claims against the general estate.

INTRODUCTION

Within one year of the Filing Date, the Trustee has effected transfers and 

distributions of billions of dollars of customer property. Most investigative and recovery 

efforts have now been successfully completed other than the major potential claims 

against insurers, JPMorgan Chase Bank, and former MF Global officers and directors,

which are all well underway as described in the body of the Report. Offices have been 

closed, staff has been reduced, administrative expenses have decreased, and claims have 

continued to be processed and resolved with distributions made even in the midst

Hurricane Sandy. The Trustee has begun analyzing the general estate and filing motions 

to eliminate duplicative, amended and superseded, and other claims.

Perhaps most significantly, a customer claims process involving over 

28,000 filed claims has been substantially completed in less than six months from the bar 

date. As detailed in the Report, of the over 28,000 commodities and securities claims

filed in this proceeding, only approximately 200 have not been finally resolved; the 

Trustee expects to have the remainder resolved in the next few months through a 

combination of consensual resolutions and, when necessary, filing omnibus claims 

determination motions, a process which has already begun.
2

The resolution of so many claims in such a short period has allowed 

clarity with respect to both the possibilities of, and impediments to, further distributions. 

As described in the Report, the Trustee must maintain reserves that largely exhaust 

customer property of domestic futures customers, foreign futures customers, and 

securities customers presently available to him for remaining claims.1

The Trustee has been reconciling claim amounts and has been involved in 

intense discussions with these parties during the last several months. He has discussed 

proposals with each of these parties designed to allow return of property and elimination 

of the major claims for which the Trustee must reserve. The Trustee does not wish to 

understate the difficulties and complexities of some of the issues involved. He believes, 

however, that a pragmatic, constructive approach on the part of all the parties and 

professionals involved has allowed these discussions to enter an advanced and critical

stage. Successful resolution would, with Court approval, permit further distributions.

 Although 

significant shortfalls would remain for both the foreign commodity futures and domestic 

commodity futures customers even with these issues resolved, the principal impediments 

to immediate further interim distributions to these customers, as well as to securities 

customers, are the large amount of 30.7 Property tied up in the UK and the hundreds of 

millions of dollars in claims filed by the Chapter 11 Debtors and MFG UK.

At least for commodities customers, however, the Trustee must caution 

that even successful resolution of these negotiations would not yield a one hundred 

percent distribution of allowed net equity claims. Achieving such an outcome would 

require substantial success in the pending litigations described in the Report, as well as 

 

1. Claims of the delivery class customers are being satisfied in full.
3

some significant allocation of non-segregated assets to the extent consistent with the 

Trustee’s fiduciary duties and controlling principles of law.

At all points, the Trustee and his professionals have acted in close 

consultation with the Securities Investor Protection Corporation (“SIPC”), and also in 

consultation with the U.S. Commodity Futures Trading Commission (“CFTC”), the 

Securities Exchange Commission (“SEC”), and various Congressional Committees, 

particularly the Senate Committee on Agriculture, Nutrition and Forestry, the Senate 

Committee on Banking, Housing and Urban Affairs, the House of Representatives 

Committee on Agriculture, and the House of Representatives Committee on Financial 

Services. The Trustee’s professionals also liaise with scores of former MFGI customers

and other creditors every week as part of the ongoing effort to maintain the utmost 

transparency in this SIPA Proceeding.
4

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.,2

2. This Report covers the period from June 5, 2012 through December 4,

2012 (the “Report Period”).

respectfully submits this Second Six Month 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

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. 

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

Engelmayer, of the United States 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-cv-07750.

PROCEDURAL BACKGROUND

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 as 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. 

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

contained in Exhibit 1.

FINANCIAL CONDITION OF THE ESTATE

 

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

3. The Trustee’s first six month interim report (the “First Interim Report,” ECF No. 1864) covered the 

period from October 31, 2011 through June 4, 2012. Additionally, the Trustee filed a preliminary 

report on the status of his investigation on February 6, 2012 (ECF No. 896) and a comprehensive 

report on his investigation and recommendations on June 4, 2012 (the “Investigative Report,” ECF No. 

1865).

The Trustee has also filed four less detailed status reports, pursuant to this Court’s Claims Process 

Order (ECF No. 423), on January 12, 2012 (ECF No. 835), March 2, 2012 (ECF No. 977), August 6, 

2012 (ECF No. 2758), and October 5, 2012 (ECF No. 3674). These reports have focused on the 

progress of the claims process and objections to the Trustee’s claim determinations. That claims 

process is now complete, as virtually all claims are determined and the remaining less than one percent 

of all public customer claims will either be resolved shortly or, to the extent consensual resolution is 

not possible, be subject to motions in the near future.
5

IV. 

7. In the months following the Filing Date, the Trustee sought to return 

customer property to customer claimants as quickly as possible through three 

commodities bulk transfers and one securities bulk transfer. For detailed information on 

these account transfers, see the First Interim Report Section V. Simultaneously, 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 

(

CLAIMS ADMINISTRATION

www.mfglobaltrustee.com). The Trustee also published notice of commencement of the 

claim process in The New York Times, Chicago Tribune, Financial Times, and The Wall 

Street Journal (see ECF No. 759).

8. 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. 

9. The Trustee maintains 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.

10. For additional statistical data regarding the claims process, see Exhibit 2.

A.

11. The Trustee received over 27,000 timely filed commodities customer 

claims. The Trustee developed an efficient process to determine commodities customer 

claims. All of the more than 27,000 timely filed commodities customer claims have now 

been determined, with 26,610 allowed, 805 denied, and 81 reclassified to securities 

customer or general creditor claims. The allowed claims have a value of approximately 

$6.7 billion.

Commodities Customer Claims Overview

12. To date, the Trustee has received 466 objections to commodities claim 

letters of determination (“LODs”), including claims of affiliates and matters already in 

litigation. The Trustee has established a team of professionals to contact claimants and 

discuss their claims and objections in an attempt to resolve objections without the need 
6

for Court intervention. Through these efforts, the Trustee has already resolved nearly

three quarters of these objections: 264 have been formally resolved, and the Trustee has 

agreed in principle on resolution of an additional 76. The Trustee’s professionals 

continue to contact the remaining objecting claimants and, with respect to any objections 

that are not able to be resolved consensually with the claimant, the Trustee will move to 

resolve these objections in accordance with the Court-approved Claims Process Order, in 

omnibus fashion whenever possible. These claims amount to less than one percent of all 

commodities claims filed in this proceeding. Motions filed to date to resolve such issues 

are described in Section IV.C, infra. As discussed in Section IV.C, the Trustee has 

already moved to confirm his determinations of claims of former MFGI customers that 

used letters of credit as margin to support their commodity futures trading, claims for 

accounts that were empty or had a negative balance as of the Filing Date, and other 

miscellaneous claims, and has continued to litigate certain residual issues related to the 

Court’s Order dated April 26, 2012 (ECF No. 1450) authorizing the first interim 

distribution (the “First Interim Distribution”). The Trustee anticipates that there may be 

more instances where the Court’s determination is required with respect to claim 

objections. For more information regarding the remaining 126 objections that have not 

been resolved formally or in principle, see Exhibit 3.

13. With respect to allowed public customer claims without objection, the 

Trustee has implemented the Court-approved First Interim Distribution, making

distributions to customers in each of the three customer account classes (i.e., domestic 

futures accounts segregated pursuant to section 4d of the Commodity Exchange Act, 

foreign futures accounts secured pursuant to 17 C.F.R. § 30.7, and delivery accounts

relating to physical customer property). As directed by the Part 190 Regulations, 

distributions to customers are pro rata among the members of each account class. 

Accordingly, customers with allowed claims to the domestic futures account class have 

received approximately 80 percent of their account value, customers with claims to the 

foreign futures account class have received approximately five percent of their account 

value, and customers with claims to the delivery account class have received a complete 

return of their property.

14. The First Interim Distribution has been made on a rolling basis to those 

public customers who filed claims, did not object to the Trustee’s determination of their 

claims, and returned valid releases.

4

 

4. Some claimants received more than their pro rata share during the account transfer process, generally a 

few percent above the 80 percent range. These claimants will not receive funds in future distributions 

until distributions reach a percentage above that which they have already received. The Trustee has the 

right to recover such excess distributions, but does not believe that they will exceed the percentage 

distribution eventually made to all customers. 

 Customers who object to any aspect of the Trustee’s 

determination of their claims have not received a distribution as part of the First Interim 

Distribution. A significant number of claimants have not yet returned a signed release to 

the Trustee, and accordingly have also not received a distribution. Checks are generally 

issued within three weeks of receipt by the Trustee of a signed release. When a claim is 

transferred to a third party transferee, the Trustee’s professionals wait 21 days to allow 

for any objections to the transfer before sending the transferee a release. Once the 
7

Trustee’s professionals receive the signed release from the transferee, distribution checks 

are generally issued within three weeks.

15. The Trustee’s goal and aspiration remains 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 future distributions on customer claims 

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

including matters pertaining to claims objections, particularly those of MF Global UK 

Ltd. and MF Global Holdings Ltd., and the extent of the availability of the 30.7 Property 

in the UK, as defined below. For more information on these contingencies, see Section

VI, infra. At the present time, the Trustee has approximately $890 million of assets on 

hand in the domestic futures customer property pool, against necessary reserves of 

approximately $753 million, precluding any further distribution until such contingencies 

have been resolved. Similarly, the Trustee has approximately $179 million on hand in 

the foreign futures customer property pool, against necessary reserves of approximately 

$114 million. The Trustee has been involved in extensive reconciliation efforts and 

discussions with these parties, which he believes may resolve some of these issues in a 

manner that will permit further distributions.

16. A full distribution will, however, require successful litigation or 

negotiated resolution of claims against third parties as well as some allocation of property 

from other sources to customer property, to the extent consistent with the Commodity 

Exchange Act, CFTC regulations, and SIPA.

B. Securities Customer Claims Overview

17. As detailed in the Trustee’s First Interim Report (see the First Interim 

Report Section V.B.), by Order dated December 12, 2011 (ECF No. 718), the Trustee 

was authorized to transfer MFGI’s non-affiliate securities customer accounts to Perrin, 

Holden & Davenport Capital Corp. (together with its clearing company Lek Securities 

Corporation, the “Transferee”). As a result, the Trustee was able to facilitate the 

expeditious transfer of 318 customer accounts (having an aggregate value in cash and 

securities of approximately $237 million) to the Transferee, allowing approximately 80 

percent of the 225 customer relationships with transferred accounts to realize a full return 

of their net equity claims within a few months of the Filing Date. The remaining nonaffiliate securities customers received between 60 percent and 90 percent of the value of 

their accounts, 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. 

18. Before reclassification, the Trustee received over 1,000 securities 

customer claims. The Trustee has now substantially completed determining all claims. 

Since March 31, 2012, the Trustee’s securities team has been involved in the 

reconciliation of securities customer claims that have been filed to date, the preparation 

and issuance of letters of determination, and in explaining such determinations to former 

customers. 
8

19. Every claimant has either received a notice of the Trustee’s determination 

or has been contacted by the Trustee’s professionals to discuss resolution of the claim. In 

total, 207 claims have been allowed, 119 denied, and 677 reclassified to commodities 

customer or general creditor claims. The allowed claims have a value of approximately 

$276 million.

20. Thus far, the Trustee has received 23 objections to securities claim 

determinations. The Trustee has begun a process of contacting the objecting claimants to 

attempt to reach resolutions without the need for Court intervention, and believes that 

relatively few of these claims will need to be resolved through motions.

21. The Trustee’s goal and aspiration continues to be to return as close to 100 

percent of allowed securities net equity claims as possible from securities customer 

property. As with the commodities claims, the size and timing of future distributions on 

securities claims is dependent upon the outcome of the Trustee’s determination of the 

disputed securities customer claims, particularly the claims filed by MF Global Holdings 

Ltd. and its affiliated debtors, and MFGI’s former foreign affiliates. These former 

affiliates have not received any distributions to date on account of their customer claims. 

The Trustee is required to maintain adequate reserves against securities customer 

property to pay such claimants in the event that their claims are allowed by the Court or 

by agreement of the parties with Court approval. For a further description of 

contingencies relating to claims of MFGI’s affiliates, see Section VI, infra. At the 

present time, the Trustee has approximately $287 million of assets on hand in the 

securities customer property pool, against necessary reserves of approximately $781

million, precluding any distributions until such contingencies have been resolved. The 

Trustee has made proposals to the trustee for MF Global Holdings Ltd. (“MFGH”) and its 

affiliated chapter 11 debtors (collectively, the “Chapter 11 Debtors”) with respect to a 

consensual resolution of most claims, which are in an advanced stage of discussion and 

which, if completed, should allow 100 percent distributions on allowed claims to be 

made.

C.

22. Already moving forward is litigation to confirm the Trustee’s 

determination of claims of former MFGI customers that used letters of credit as margin to 

support their commodity futures trading. Only three former customers, ConocoPhillips 

Company, ConocoPhillips Canada Marketing & Trading ULC (together 

“ConocoPhillips”), and Koch Supply and Trading, LP (“Koch”), have objected to the 

Trustee’s determination that the full value of letters of credit posted as margin is 

customer property subject to pro rata distribution under the Part 190 Regulations (ECF 

Nos. 2192, 2532). To confirm his claim determinations, the Trustee is currently engaged 

in parallel litigation proceedings with ConocoPhillips and Koch, with Levine Lee LLP 

serving as special counsel in connection with Koch (see ECF No. 2794). The CFTC has 

submitted papers in support of the Trustee in both the ConocoPhillips and Koch disputes. 

Customer Claims Litigation

23. On July 30, 2012, the Trustee filed in the Bankruptcy Court a Motion for 

an Order Confirming the Trustee’s Determination of ConocoPhillips’ Claims to Customer 
9

Accounts Margined with Letters of Credit (ECF No. 2632). On August 8, 2012, 

ConocoPhillips moved to withdraw the reference from the Bankruptcy Court to the 

District Court with respect to the Trustee’s motion (Case No. 12-cv-06014, ECF No. 1). 

Following briefing and oral argument, the District Court granted ConocoPhillips’ motion 

to withdraw the reference (Case No. 12-cv-06014, ECF No. 26). Merits briefing is 

complete, and the matter is scheduled for oral argument before the Honorable

Katherine B. Forrest on December 19, 2012.

24. On July 19, 2012, Koch initiated an adversary proceeding in the 

Bankruptcy Court seeking a declaratory judgment that it had no liability with respect to 

its expired letter of credit (Case No. 12-ap-01754, ECF No. 1). On the same day, Koch 

filed a motion to withdraw the reference from the Bankruptcy Court to the District Court 

(Case No. 12-cv-05596, ECF No. 1). The Honorable Naomi R. Buchwald heard oral 

argument on the motion to withdraw the reference on November 20, 2012, and the matter 

is sub judice. Pending a District Court ruling, the Trustee and Koch have both filed and 

responded to cross-motions seeking summary judgment in the adversary proceeding with 

briefing scheduled to be complete by December 21, 2012.

25. In addition to the letters of credit claims litigation, on November 28, 2012, 

the Trustee filed a motion to (i) uphold his determinations of certain claims for accounts 

that were in debit or empty as of the Filing Date, (ii) confirming the First Interim 

Distribution amount for Bimbo Foods Inc., and (iii) expunging related objections (ECF 

No. 4674). The motion seeks the Court’s determination concerning certain objections 

that the Trustee has not been able to resolve consensually through discussion with the 

claimants. The motion seeks to uphold the Trustee’s determinations of three claims and 

confirm the First Interim Distribution amount with respect to one claimant.

26. During the claims determination process described above, the Trustee’s 

professionals reviewed the books and records of MFGI and determined that many claims 

were for accounts that were empty or had a negative balance as of the Filing Date. 

Accordingly, the Trustee issued letters of determination denying these claims. The 

Trustee received approximately 50 objections to determinations of claims related to 

accounts in debit or empty as of the Filing Date. The Trustee’s professionals contacted 

these claimants and in many cases have agreed with the claimants on a consensual 

resolution of the objection. The Trustee was not able to reach such a resolution with the 

claimants subject to the motion.

27. The Trustee has also continued to litigate certain residual issues related to 

the Court-approved First Interim Distribution on allowed commodities customer claims. 

In April 2012, one claimant, Ms. Jill Zunshine, appealed the Order in Furtherance of 

Claims Processing Order (ECF No. 1449) and the First Interim Distribution Order (ECF 

No. 1450) to the District Court. Ms. Zunshine sought a distribution on her allowed 

commodities customer claim without having to execute and return to the Trustee a 

declaration and release form (the “Declaration and Release”), as required by the Court. 

However, Ms. Zunshine did not seek any stay of these Orders and, as a result, the Trustee 

has fully implemented the Claims Process Order and the First Interim Distribution Order, 

as described herein. During the Report Period, both the Trustee and SIPC filed briefs in 
10

the District Court in opposition to Ms. Zunshine’s appeal (see Case No. 12-cv-04139, 

ECF Nos. 8, 12). Currently, the appeal is fully briefed and sub judice before the District 

Court. 

28. Another claimant, Mr. Keith Hamaker, sought this Court’s authority to file 

a Declaration without a Release in order to receive a distribution on his allowed 

commodities customer claim. On November 13, 2012, the Court issued an order denying 

Mr. Hamaker’s request, finding that no compelling circumstances warrant 

reconsideration of the Court’s approval of the Trustee’s Declaration and Release and that 

the doctrine of law of the case bars Mr. Hamaker’s request (ECF No. 4430).

29. Additionally, the Trustee filed a motion (ECF No. 1785) to uphold his 

determination denying a $150 trillion commodities claim and a $49.1 billion securities 

claim with no support in MFGI’s books and records, which was granted by the Court 

(ECF No. 2044).

30. The Trustee has also been served as a co-defendant with a complaint 

commencing an adversary proceeding by Mercuria Energy America Inc. (“Mercuria”), 

alleging that Mercuria is entitled to offset the full value of a pre-liquidation loan made by 

MF Global Finance USA Inc. (“FinCo”) to Mercuria against Mercuria’s claims for 

damages and the value of its account at MFGI. Mercuria is the holder of an allowed 

customer claim subject to claims by FinCo as a lien holder for financing the account. 

The underlying dispute between FinCo and Mercuria is in the process of being resolved, 

and the Trustee is part of the settlement solely for purposes of returning distributions on 

the customer claims as directed by the parties and having the duplicative FinCo claims to 

the account withdrawn. This agreement may serve as a template for a number of other 

allowed customer claims that had been financed by FinCo, further reducing objections 

and the need to reserve.

D.

31. In keeping with SIPA and § 704(a)(5) of the Bankruptcy Code, the Trustee 

has initiated a comprehensive review and reconciliation of all general creditor claims 

filed in this proceeding to determine the validity and actual allowed amounts of such 

claims. In the interest of reducing the administrative and financial burden imposed on the 

Court and the MFGI estate and expediting the process, the Trustee filed his motion for 

approval of general creditor claim objection procedures and settlement procedures (ECF 

No. 3365), which was approved by the Court on October 11, 2012 (ECF No. 3765).

General Creditor Claims Overview

32. During the Report Period, the Trustee began the process of objecting to 

claims by filing his first through seventh omnibus objections to general creditor claims 

pursuant to § 502(b) of the Bankruptcy Code as made applicable to this proceeding by

SIPA §§ 78fff(b) and 78fff-1(a) and Rule 3007(d)(1) of the Federal Rules of Bankruptcy 

Procedure. The first, second, third, fourth, and fifth omnibus objections (ECF Nos. 3134, 

3575, 3954, 3957, 4234), expunging duplicative and amended claims, have been granted, 

expunging 134 claims for a total value of $1,668,790,147.26 (ECF Nos. 3766, 4336, 

4594, 4595, 4596). The sixth and seventh omnibus objections (ECF Nos. 4506, 4711) 
11

seek to expunge 205 duplicative claims with a total value of $2,151,210.21. The Trustee 

also filed an objection (ECF No. 3373) to a purported $10 billion claim that was granted, 

expunging the claim (ECF No. 3767). Further omnibus and other objections will be filed 

on a regular basis.

33. The Trustee’s preliminary analysis of general creditor claims reflects that 

more than 6,600 claims have been filed as general creditor claims against the MFGI 

estate, including affiliate claims, in an asserted amount of approximately $22.8 billion 

(without ascribing value to unliquidated amounts).

34. In addition, of the more than 28,000 claims filed as customer claims 

against the MFGI estate, approximately 650 have been reclassified as general creditor 

claims. The Trustee estimates that the aggregate claimed amount for these reclassified 

claims is approximately $582 million. Approximately 4,700 claims filed as general 

creditor claims were for commodity futures accounts. The Trustee estimates that the 

aggregate claimed amount for these claims is $193 million. The vast majority of these 

claims were duplicative of claims originally filed as customer claims, and the Trustee will 

object to them as duplicative as part of the general creditor claims process. 

Approximately 100 of the reclassified claims were unique customer claims and have been 

reclassified as such and included in the customer figures reported above.

35. A total of 26 affiliate general creditor claims have been filed, asserting 

amounts totaling approximately $2.3 billion.

36. Of the more than 6,600 claims filed as general creditor claims, including 

the affiliate claims, and the approximately 650 customer claims that have been 

reclassified as general creditor claims, approximately 770 claims seeking priority status 

under the Bankruptcy Code have been filed, with an asserted value of approximately 

$48.2 million.

37. EPIQ Bankruptcy Solutions, LLC maintains Customer and General 

Creditor Claims Registers (the “Registers”). Parties-in-interest may review both 

Registers and filed claim forms at http://dm.epiq11.com/MFG2/Project. Representatives 

of the Trustee, including counsel, are not authorized to answer questions about specific 

claims or claim amounts other than from owners of the claim. Parties should take notice 

of the disclaimers accompanying both Registers and the notes associated with the 

Customer Claims Register.

V. MARSHALING OF CUSTOMER AND NON-SEGREGATED

A.

UNALLOCATED PROPERTY

38. 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. Concurrently, the Trustee 

Accounts Established Under Trustee Control
12

continued closing MFGI bank accounts that contained de minimis dollar balances on the

Filing Date.

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

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

unallocated property. The Trustee has 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 is in the process of closing 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.

40. In operation, MFGI’s commodities customer property was maintained at 

either Depository Clearing Organizations (“DCOs”) or in segregated bank accounts. All 

customer property at DCOs as of the Filing Date that was not transferred to customers 

during the account transfer process is under the Trustee’s control at Union Bank. 

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

brokers worldwide. During the Report Period, the Trustee successfully marshaled 

approximately $49 million in 30.7 funds from three of the carrying brokers and banks. 

The Trustee’s counsel is in active negotiations with the remaining carrying brokers to 

collect assets and close the accounts, each of which has agreed in principle to return the 

funds.

Recovery of Commodities Customer Property

41. 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.

C.

42. On the Filing Date, MFGI property held or controlled by CMEG totaled 

over $175 million. On June 14, 2012, the Trustee filed a motion for approval of an 

agreement between the Trustee and CMEG (the “CME Agreement”) providing for the 

return of MFGI property, extinguishment of duplicate claims filed with CMEG, and 

allocation of MFGI property to customers of the MFGI estate (the “CME Motion,” ECF 

No. 2029). After briefing and a hearing on the CME Motion, on August 10, 2012, the 

Court entered a Memorandum Opinion and Order (together, the “CME Order,” ECF Nos. 

2824, 2825) granting the CME Motion and approving the CME Agreement.

CME Group Inc. (“CMEG”)

5

 

5. Despite the fact that no timely appeal was filed, on August 29, 2012, Paul Hamann filed a request for 

certification of his appeal of the CME Order with the United States Court of Appeals for the Second 

Circuit (ECF Nos. 3457, 3458). The Trustee will respond to Mr. Hamann’s request as appropriate.

 Since entry 

of the CME Order, over $130 million of MFGI property was returned by CMEG to the 

Trustee and allocated to customer estates per the CME Agreement’s terms. The Trustee 
13

and his professionals continue to work with CMEG to liquidate and/or sell MFGI’s 

memberships on various CMEG exchanges as well as dispose of claims asserted under 

the rules promulgated by the CMEG exchanges, pursuant to the terms of the CME 

Agreement.

D.

43. Virtually all property has been recovered from the Intercontinental

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. To the extent any amounts remain at these exchanges, the 

Trustee continues to negotiate their return under terms similar to those reached with 

CMEG.

Other Exchanges

E.

44. The Trustee continues to work toward the complete return of property 

from DTCC to the Trustee. Assets that remain at DTCC are those frozen by DTCC for 

reasons other than MFGI’s liquidation. DTCC and the Trustee expect that those positions

should transfer within the next several weeks. DTCC has returned $235 million in cash 

to the Trustee, and the Trustee and DTCC will continue to work together regarding the 

return of the $17 million in cash that remains with DTCC.

Depository Trust & Clearing Corporation (“DTCC”)

F.

45. 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 $519 million of non-segregated unallocated assets and 

$89 million of customer assets.

JPMorgan Chase Bank, N.A. (“JPMC”)

6

G.

 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 that the Trustee is investigating and 

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

Investigative Report. During the Report Period, the Trustee has continued to engage in 

active discussions with JPMC regarding the claims, in hopes of resolving disputes 

without litigation and for the benefit of customers and the estate.

46. 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 

Bank of New York - Mellon (“BNYM”)

 

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

conversion rates for foreign currency.
14

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.

47. 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.

H.

48. The Trustee and his professionals have continued to work diligently on the 

recovery of value from the unwinding of financial products transactions between MFGI

and other broker-dealers, financial institutions, and other parties. For a description of the 

transactions involved, see the First Interim Report Section VI.I.

Closeouts and Unwinds

49. During the Report Period, the Trustee collected approximately $6.3

million from seven counterparties that owed termination amounts to MFGI. The Trustee 

has now collected in total approximately $85 million of non-segregated unallocated 

assets. 

50. There remain a number of counterparties who the Trustee has identified as 

owing termination amounts to MFGI as of the Filing Date. The Trustee and his 

professionals have contacted or are currently in active negotiations with the remaining 

counterparties. The remaining termination amounts owed to MFGI as of the Filing Date 

amount to between $25 million and $30 million in the aggregate. The Trustee continues 

to work with these counterparties and their counsel to reach an agreement on the closeout 

value and collect the termination amount due to MFGI on a consensual basis wherever 

possible. 

VI. 

A.

FORMER MFGI AFFILIATE MATTERS

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

the trustee (the “Chapter 11 Trustee”) for 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.

MF Global Holdings Ltd. Matters

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

11 Debtors. These amounts total approximately $110.3 million for commodities claims 

and approximately $556.5 million for securities claims. In May of this year, the Trustee 

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

and denying customer protection to the commodities claims filed by MFGH and FinCo. 

On June 15, 2012, the Trustee issued determination letters as to the commodities claims 

filed by MFG Capital LLC, MF Global FX Clear LLC, MF Global Special Investor LLC,
15

and MF Global Market Services LLC, allowing certain of the claims as non-public 

commodities customer claims.

53. In August 2012, the Trustee filed consolidated intercompany claims 

against the Chapter 11 Debtors including: (i) a claim in the amount of $89,121,319 based 

on intercompany receivables owed to MFGI as recorded in the Oracle GL System, (ii) a 

claim for the amount of the shortfall in the funds of securities and commodities customer 

property, (iii) a claim for all amounts owed on derivative, repurchase and securities and 

other financial contracts between MFGI and the Chapter 11 Debtors, and (iv) other 

contingent and unliquidated claims for any intercompany indebtedness or other open 

payables owed by the Chapter 11 Debtors to MFGI. The Trustee’s professionals have 

also substantially reconciled the Chapter 11 Debtors’ general creditor claims against 

MFGI.

54. The Trustee and the Chapter 11 Trustee, and their respective professionals, 

engage regularly in meetings and conference calls in furtherance of negotiating an 

efficient and expeditious resolution of their respective claims. The Trustee has discussed 

resolving the customer claims in a manner that he believes is consistent with the status of 

the accounts and would eliminate substantial parts of the reserves so that further interim 

distributions could be made, at least to the domestic futures and securities customers. 

These proposals are in what the Trustee considers an advanced stage of discussion.

B.

i.

MF Global UK Ltd. and Other Foreign Affiliate Matters

55. 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. 

United Kingdom

56. 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 

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 was elected as a client representative to MFGUK’s creditors’ 

committee and has retained legal counsel in the United Kingdom. On March 27, 2012, 

the High Court granted the Trustee’s application and issued an order recognizing the 

SIPA Proceeding as a foreign main proceeding in accordance with the United Nations 

Model Law on cross-border insolvency.

57. The Trustee’s claims against MFGUK consist of the following:

(i) A client claim of approximately $911 million, which 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 
16

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. (see Investigative Report at 130–36). 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.

On May 3, 2012, at the urging of the Trustee, the JSAs made an application to 

the English 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. 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.

(ii) A formal creditor claim of approximately $462.8 million relating to 

collateral posted with respect to certain “repurchase to maturity” (“RTM”) 

transactions. The JSAs disputed the Trustee’s valuation and, specifically, the 

legal basis for that valuation. On July 4, 2012, the JSAs sought directions 

from the English High Court to resolve this dispute. A hearing on the dispute 

was held on October 23, 2012, and on November 1, 2012, the English High 

Court issued a judgment in favor of the JSAs and ordered that the Trustee 

reimburse the JSAs for the costs associated with the litigation of the 

application. The Trustee has thoroughly considered the judgment and 

potential grounds for appeal, and has determined that further litigation of this 

issue is not in the best interests of MFGI’s customers and creditors. As a 

result, the Trustee has not made an application to appeal the November 1, 

2012 judgment. Resolution of the award of costs remains under discussion 

with the JSAs.

58. 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 these claims.

59. On June 18, 2012, the JSAs filed an application with the English High 

Court seeking directions as to whether or not the client money entitlement of a client of 

MFGUK in respect of an “open position” should be determined as at the date of the 

Primary Pooling Event (“PPE”): (1) by reference to the market value or any mark-tomarket value as at the PPE; or (2) by reference to the liquidation value, i.e., the amount at 

which the open position was subsequently closed out on a date after the PPE (the 

“Hindsight Proceeding”). The English High Court appointed two representative clients 

of MFGUK to argue the two sides of the case. The Trustee was not a party to the 

Hindsight Proceeding but, because the relevant part of the Trustee’s client money claim 

was prepared on the basis of values as at October 31, 2012, the outcome may impact the 

Trustee’s client money claim. Accordingly, the Trustee’s counsel monitored the 

submissions of evidence, expert testimony, and argument. A hearing on the application 

was held on October 30–31, 2012, and a decision by the English High Court remains 

pending. 
17

60. Pursuant to a February 24, 2012 Information Exchange Agreement and 

Protocol, the Trustee and the JSAs have exchanged documents and information concerning 

their respective claims. The Trustee’s professionals regularly correspond and meet with the 

JSAs’ professionals with the aim of an efficient and expeditious resolution of the parties’ 

claims. As with the Chapter 11 Trustee, the Trustee has made proposals that would resolve 

issues between the parties in this case on both sides of the Atlantic, and would determine 

claims, allow the reduction of reserves, and facilitate the eventual return of property. While 

there are many issues to resolve and potential conditions to any agreement, as with the 

Chapter 11 Debtors, the Trustee considers these proposals to be in an advanced stage of 

discussion.

ii.

61. 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. 

Canada

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

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

63. 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 $500,000, (ii) a claim by MFGI, on its own behalf, as a foreign futures 

customer of MFG Canada, of approximately $900,000, and (iii) a claim by the Trustee on 

behalf of MFGI’s foreign futures and foreign options customers of approximately $103 

million. 

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

further litigation. A settlement agreement was agreed between the Trustees, approved by 

the Canadian Trustees’ inspectors, and approved by both the U.S. Bankruptcy Court and 

the Canadian Superior Court. Under the terms agreed upon by the Trustees, the Canadian 

Trustees will withdraw their claims in the MFGI liquidation and approximately $62 

million of customer property is expected to be returned to the Trustee.

iii.

65. Several other former affiliated companies of MFGI have submitted customer 

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

Other Former Affiliates
18

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 $3,000. Net of duplicates, the Liquidators of MF 

Global Singapore Pte. Limited filed commodities claims of approximately $13 million and

securities claims of approximately $400,000. 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.

VII. 

66. 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, 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. 

RETURN OF MISDIRECTED FUNDS

67. 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 $16.3 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).

VIII. 

68. 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 in furtherance of this duty (ECF No. 34), and thereafter pursued 

numerous avenues of investigation.

TRUSTEE’S INVESTIGATION

69. The first of the Trustee’s 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. 
19

70. Concurrently with the First Interim Report, the Trustee filed his second 

report on the status of his investigation (the “Investigative Report,” ECF No. 1865). 

Thereafter, the Trustee’s professionals largely wound down their investigatory activities.

IX. 

71. 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 around the United States. Together, the Trustee has made a total of over 428 

document productions in response to these governmental and non-party requests and the 

Trustee expects to continue receiving and responding efficiently to such requests. 

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

information, the productions continue to be a significant expense for the MFGI estate.

GOVERNMENT AND THIRD PARTY INVESTIGATIONS

72. 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, the Financial Industry Regulatory Authority, 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.

Regulatory Matters

X. 

A.

LITIGATION

73. The Customer Representatives are customers of and former commodities 

account holders at MFGI who have brought class action claims against certain former 

officers, directors, and other employees of MFGI or MFGH, and other third parties. The 

Judicial Panel on Multidistrict Litigation has now consolidated these lawsuits in the 

Southern District of New York before the Honorable Victor Marrero, and the Customer 

Representatives have been named as interim lead plaintiffs for the putative class of 

similarly situated former customers of MFGI. 

Cooperation with Customer Representatives

74. The Trustee and the Customer Representatives share a common interest to 

maximize recovery for MFGI customers, while minimizing the litigation costs associated 

with the prosecution of claims to secure such recovery. 

75. To further this common interest, the Trustee and the Customer 

Representatives entered into a Common Interest Agreement dated June 8, 2012 that 

provides, among other things, for the coordination of discovery to advance their 

respective claims against the former officers, directors, and other employees of MFGI or 

MFGH, and other third parties, and states the Trustee’s and the Customer 
20

Representatives’ intention that any information that is protected under the attorney-client 

privilege, work-product privilege, or other applicable privilege may be exchanged 

between the Trustee and the Customer Representatives and be within the common or 

joint interest privilege to the fullest extent permitted by law. The Trustee has proposed 

creating a document repository that would allow all parties access to materials relevant to

the litigation. Most parties have agreed to the terms of the Trustee’s proposed repository, 

but defendants have resisted, hindering the Trustee’s ability to quickly and fairly share 

information in a cost-efficient manner. The Trustee continues to work toward 

establishing an information-sharing process satisfactory to all parties.

76. The Trustee and the Customer Representatives also entered into a 

Continuing Cooperation and Assignment Agreement that establishes a framework for 

cooperation between the Trustee and plaintiffs’ counsel to actively and efficiently 

prosecute all claims through the currently pending litigation, with all recoveries 

distributed through the Trustee’s claims process. To accomplish those goals, the Trustee 

assigned certain claims of the estate against the former officers, directors, and other 

employees of MFGI or MFGH, and against MF Global’s independent auditor, to the 

Customer Representatives. The cooperation agreement supports the Trustee’s goal to 

recover the missing customer funds and other recoveries in the most cost-effective, 

efficient, and equitable manner possible for the benefit of all of MFGI’s customers and 

creditors, while conserving resources for the benefit of all of MFGI’s customers and 

creditors. The Continuing Cooperation and Assignment Agreement was approved by 

Order the Bankruptcy Court on October 11, 2012 (ECF No. 3764), and Order of the 

District Court on October 19, 2012 (Case No. 11-cv-07866, ECF No. 375).

77. On November 5, 2012, the Customer Representatives filed a Consolidated 

Amended Class Action Complaint against former CEO Jon Corzine, former CFO Henri 

Steenkamp, former COO Bradley Abelow, former General Counsel Laurie Ferber, former 

Assistant Treasurer Edith O’Brien, former CFO Christine Serwinski, former Global 

Treasurer David Dunne, former Global Treasurer Vinay Mahajan, MF Global’s 

independent auditor PricewaterhouseCoopers LLP, and CME Group, Inc. (“CMEG”), 

along with its subsidiary Chicago Mercantile Exchange, Inc. (“CME”), alleging, among 

other things, violations of the Commodity Exchange Act, breach of fiduciary duty, and 

negligence, among other causes of action (Case No. 11-cv-07866, ECF No. 382). 

78. The Consolidated Amended Class Action Complaint includes claims 

against the directors, officers, and the independent auditor that were assigned by the 

Trustee to the Customer Representatives in the Continuing Cooperation and Assignment 

Agreement, asserted on behalf of commodities and securities claimants as bailee of 

customer property, as well as on behalf of the corporate entity for the benefit of general 

creditors.

79. The Trustee did not assign claims to the Customer Representatives 

concerning CMEG, CME, or any entity or person other than former directors and officers 

and the independent auditor. The Customer Representatives’ counsel is pursuing claims 

against CMEG and CME on behalf of the class, and not on behalf of the Trustee or 

MFGI.
21

B.

80. As previously reported, on the Filing Date, MFGI was party to several 

affirmative litigation proceedings in Illinois state court. During the Report Period, the 

Trustee settled these claims and the Court approved the settlements (see ECF Nos. 2282, 

2492, 2493). 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, and is discussed in greater detail in Section XVI, infra.

Pre-Liquidation Litigation

C.

81. In addition to participating in the claims litigation discussed above (see 

Section IV.C, supra), on June 15, 2012, the Trustee filed a statement (see Case No. 12-

cv-03757, ECF No. 17) regarding Sapere Wealth Management LLC’s, Granite Asset 

Management’s and Sapere CTA Fund, L.P.’s (collectively, “Sapere”) appeal from the 

Bankruptcy Court’s memorandum opinion (Case No. 11-15059, ECF No. 400) denying 

Sapere’s request that the Commodity Broker Liquidation Provisions and the Part 190 

Regulations should be applied to the Chapter 11 Debtors. The Trustee agreed with the 

Bankruptcy Court’s opinion that there is no legal basis for the relief requested by Sapere. 

On October 5, 2012, the District Court issued an opinion finding that the Bankruptcy 

Court’s memorandum opinion was not a final order subject to appeal, but rather 

interlocutory, and the District Court denied Sapere’s leave to appeal (Case No. 12-cv03757, ECF No. 20). Sapere has appealed the District Court’s ruling to the United States 

Court of Appeals for the Second Circuit (Case No. 12-cv-03757, ECF No. 23). 

Other Litigation

82. On October 9, 2012, the claims against MFGI were dismissed in the 

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-ap02880, ECF No. 62).

83. On November 26, 2012, the Commodities Customer Coalition filed a 

motion seeking to depose former CEO Jon Corzine and other former officers and 

directors of MF Global pursuant to Rule 2004 of the Federal Rules of Bankruptcy 

Procedure (ECF No. 4592). The Trustee is evaluating his response to this motion in light 

of, among other things, its possible effect on the customer class actions discussed in 

Section X.A, supra, involving the conduct of the same officers and directors.

XI. 

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

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

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

information.

DATA MANAGEMENT
22

85. 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. The 

categories and quantities of information preserved, amounting to over 100 terabytes of 

data or the equivalent of approximately one-third of the contents of the Library of 

Congress, are described in detail in the First Interim Report Section XII.

86. 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. 

XII. 

87. 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 overseeing compliance with tax reporting requirements.

TAX MATTERS

A.

88. All required Forms 1099 and 1042-S for 2011 were timely mailed to 

recipients. 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. The call center continues to receive 

calls, which are routed to a voice mailbox where callers can leave messages. The calls 

are returned within three business days. 

1099 and Related Reporting

B.

89. Beginning with 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 Ltd. (“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,” which 

files a combined return. 

The MF Global Consolidated and Combined Groups
23

C.

90. 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.

Tax Audits and Refund Claims

7

91. On July 27, 2012, the Trustee and MFGH USA jointly filed a protective 

claim for a refund of telecommunications excise tax and jointly engaged Tax Projects 

Group, LLP on a contingency fee basis to assist in obtaining the necessary documentation 

to support the claim. On October 11, 2012, the IRS issued an information document 

request asking for additional information regarding the claim. The Trustee’s 

professionals maintain ongoing discussions with representatives of MFGH USA and Tax 

Projects Group, LLP, as to the status of the refund claim and the provision of the 

requested information.

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

2008 and for 2010 that relate to errors on certain information returns. The Trustee’s 

professionals are working to seek abatement of these penalties.

XIII. 

93. 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 complete this process, 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 § 365(d)(1) of the Bankruptcy 

Code, to, and including, December 31, 2012 (ECF No. 2795) so that the Trustee may 

confirm that all ongoing contractual commitments have been resolved.

EXECUTORY CONTRACTS

XIV. 

94. 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.

INTERNAL CONTROLS AND BOOKKEEPING

 

7. Joint Committee approval is required because of the size of the claimed refund. 
24

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

hoc practices to support the processing of MFGI’s former business in accordance with the 

liquidation. However, they are not comparable to that of an entity operating as a going 

concern.

XV. 

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

firm and consultant retained by the Trustee has agreed to a voluntary “public interest 

discount” of 10 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-hours travel services. 

PROFESSIONAL RETENTION

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

insolvency proceedings have been commenced in numerous jurisdictions, the Trustee 

requires counsel, in addition to Hughes Hubbard & Reed LLP, to attend to certain 

matters. The Trustee appoints and compensates counsel pursuant to Court-authorized

procedures (see ECF Nos. 419, 1286).

98. During the Report Period, Slaughter and May continued to advise the 

Trustee regarding the MFGI estate’s rights, duties, and powers in connection with the 

MFGUK Special Administration (see Section VI.B.i, supra); Blake, Cassels, Graydon 

LLP continued to advise the Trustee in connection with the MFG Canada proceeding (see

Section VI.B.ii, supra); and Haynes and Boone continued to advise the Trustee on 

matters related to PricewaterhouseCoopers LLP (MF Global’s auditors). In addition, on 

August 8, 2012, the Court authorized the Trustee to retain Levine Lee LLP (ECF No. 

2794) to advise the Trustee on matters related to Koch arising from a certain letter of 

credit with MFGI (see Section IV.C, supra).

XVI. 

99. The Trustee’s professionals have filed claims or notices of potential claims 

for insurance coverage relating to the events leading to MFGI’s liquidation with various 

insurers that have issued insurance policies insuring MFGI and/or its customers. The 

Trustee’s professionals have been in regular communication with MFGI’s insurers 

regarding the status of its claims and continue to analyze the policies insuring MFGI to 

determine their applicability as sources of potential recovery for the MFGI estate. Those 

insurance policies include Directors & Officers (“D&O”) Insurance, Professional 

Liability (“Errors & Omissions” or “E&O”) Insurance, Excess SIPC Insurance, and a 

Fidelity Bond. 

INSURANCE

100. Beginning in early 2012, a group of commodities customers, led by Sapere 

Wealth Management, LLC, Granite Asset Management, and Sapere CTA Fund, L.P.

(collectively, “Sapere”), objected to certain of MFGI’s D&O and E&O insurers seeking 

to lift the automatic stay to pay defense costs to individuals under insurance policies that 

also insured MFGI (see, e.g., Case No. 11-15059, ECF Nos. 416, 417, 419, 422, 477, 

482, 484). The Trustee also filed a claim with MFGI’s E&O insurers, which those 

insurers are investigating. The Trustee filed a statement with the Court, addressing 
25

certain points raised by the objectors (Case No. 11-15059, ECF No. 489). The Trustee’s 

position was that, while he would welcome the proceeds of any insurance policy, it was 

unclear whether Sapere had articulated a claim that presented the Trustee with an 

immediate right to recover the entire limits of those insurance policies, which also 

explicitly provide a right to defense costs to certain MFGH and MFGI employees. The 

Trustee did not object to lifting the stay to permit payment up to a specified amount for 

defense costs, provided the amount was a relatively small percentage of total coverage 

and that some reporting of payment amounts was made. In April 2012, Judge Glenn 

determined that there was cause to lift the automatic stay to permit the payment of 

defense costs to certain insureds of the D&O and E&O policies (see Case No. 11-15059, 

ECF No. 619, 652). Judge Glenn limited that order to permit payments up to a “soft cap” 

of $30 million, at which time the parties and the Court could reevaluate whether 

continuing such payments would be appropriate, and ordered periodic reporting of 

amounts paid (see Case No. 11-15059, ECF No. 619 at 30–31).

101. Sapere appealed Judge Glenn’s April 2012 ruling and moved to stay that 

order pending its appeal. Judge Forrest of the Southern District of New York denied 

Sapere’s motion for a stay (see Case No. 12-mc-00143, ECF No. 17), and, after further 

briefing and argument in November 2012, affirmed Judge Glenn’s April 2012 decision

(see Case No. 12-cv-04597, ECF No. 20). Sapere recently filed a notice of appeal of that 

decision to the United States Court of Appeals for the Second Circuit (Case No. 12-cv04597, ECF No. 23). The Trustee continues to pursue MFGI’s claim against those E&O 

Policies and may reevaluate his position on whether the payment of defense costs 

continues to be proper once the initial $30 million “soft cap” contemplated by Judge 

Glenn’s order is reached. To date, approximately $12.5 million in defense costs has been 

paid by the relevant E&O and D&O insurers. 

102. On July 25, 2012, the Trustee’s professionals submitted a proof of loss to 

the Fidelity Bond insurers for segregation failures at MF Global. The Trustee also 

continues to pursue recovery for the MFGI estate on a 2008 Fidelity Bond claim. That 

claim relates to the trading activities of Evan Dooley, who over the course of a single 

night of improper overnight trading in wheat futures in 2008, amassed more than 

$141 million in losses. MFGI filed a claim with its Fidelity Bond insurers, which denied 

the claim and filed a declaratory judgment action in New York State Court, entitled New 

Hampshire Ins. Co., et al. v. MF Global Inc., seeking a ruling that the Fidelity Bond did 

not cover the loss. The insurers asserted multiple grounds for denying coverage and 

moved for summary judgment on one of those grounds, i.e., that MFGI did not sustain a 

direct loss. The New York Supreme Court ruled against the insurers, finding that MFGI 

did sustain a direct loss. The New York Supreme Court also found that Mr. Dooley was 

an employee of MFGI (one of the insurers’ other grounds for denying coverage). The 

insurers appealed and, before the appellate argument occurred, the MFGI SIPA 

Proceeding commenced, staying those appeal proceedings. Since October 2011, the 

Trustee and his professionals have participated in ongoing meetings with the insurers to 

attempt to settle the claim, but no settlement has been reached. In November 2012, the 

insurers moved to lift the automatic stay to allow the appeal to proceed (ECF No. 4509). 

The Trustee is evaluating his response to this motion and expects to pursue litigation on 

his claim if the matter cannot be resolved consensually.
26

103. The Trustee and his professionals are also communicating with Lloyd’s, 

which provides Excess SIPC Insurance for MFGI’s customers, as it continues its 

monitoring of the status of the SIPA Proceedings and the recovery to MFGI’s securities 

customers.

XVII. 

104. 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.

COMMUNICATIONS WITH CUSTOMERS

105. 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 21,000 inquiries through the general call center. 

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

dedicated to inquiries relating to claims determinations and tax matters.

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

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

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

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, 

1864, 1865, 2758, 3674).

XVIII. 

107. The Trustee continued to reduce the estate’s real estate, physical assets, 

staff, and administrative expenses during the Report Period. This includes the rejection

of the remaining real property leases in Chicago. As previously reported, the savings 

resulting from the rejection of all MFGI real property leases is, in the aggregate, 

approximately $118 million. For information concerning the Trustee’s efforts to reduce 

real estate, staff, and other administrative expenses immediately after the commencement 

of liquidation, see the First Interim Report Section XVIII.

REDUCTION OF ADMINISTRATIVE EXPENSES

108. Pursuant to Court Order authorizing the sale of remaining physical assets 

(ECF No. 2009), the Trustee hired Hyperams Asset Maximization Services (“Hyperams”) 

to conduct a sale of physical assets through an online auction. The items for sale 

included artwork and promotional materials. The auction concluded in November 2012, 

and Hyperams now has a brief opportunity to sell remaining items that it did not sell in 

the auction, after which point it may dispose of the remaining items. The Trustee 

anticipates an auction report and summary from Hyperams in December, once Hyperams’ 

work is complete.

109. The Trustee has moved the MFGI office equipment and supplies necessary 

to conduct the business of the liquidation to the estate’s office in New York. Residual 
27

office items that had no value were disposed of as part of the process of vacating the real 

estate. All estate technology has been identified and grouped into one of three categories. 

First, the Trustee moved technology that was determined to be necessary to run 

operations to a New York data center. Second, technology with data necessary to 

preserve has been identified and stored. Third, the Trustee identified and consolidated 

technology to be sold and, after requesting proposals, received six, which were each 

reviewed by the Trustee’s professionals. The Trustee selected HiTech Assets, Inc., the 

highest bidder, which purchased the technology in late May 2012 for approximately 

$400,000.

110. 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. As previously reported, the Trustee hired several hundred former MF Global 

employees on a temporary basis to assist with the liquidation. As of December 3, 2012, 

this number was reduced to nine employees. Payroll and payroll taxes for the Report 

Period totaled $1,166,570.57, reduced from $15,675,216 for the pay period ending 

October 31, 2011.

XIX. 

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

Proceeding and the material events that have occurred from June 5, 2012 through 

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

CONCLUSION

Dated: New York, New York

December 4, 2012

Respectfully submitted,

HUGHES HUBBARD & REED LLP

By:

A member of the firm

 /s/ James B. Kobak, Jr.

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:

Customer Property Pools

Description

Amount in US Dollars in Millions

(as of October 31, 2012)

4d 

Commodities 

Customers

30.7 

Commodities 

Customers

Delivery Class 

Customers

Securities 

Customers

Amount of Claims Filed $ 8,6081 $ 1,162 $ N/A2 $ 1,4063

Estimated Obligations Based on Claims Determined and 

Reserves4 6,233 1,059 106 1,039

Assets Marshaled to Date 5,321 294 120 527

Assets Transferred or Distributed 4,431 115 76 240

Assets Remaining 890 179 44 287

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

expunged with Court approval (ECF No. 2044).

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. Customer obligations are presented on a net basis. For securities customer obligations, the gross balances are substantially greater. This amount does not include 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 expunged with Court approval (ECF No. 2044).

4. In estimating obligations based on claims determined and reserves, the Trustee’s professionals calculated the aggregate value of determined customer claims, as well as 

reserves necessary for a number of contingencies described in the Trustee’s Second Six Month Interim Report. The Trustee is obligated to reserve conservatively for 

these contingencies, but expects that the estimated obligations will decrease significantly as these contingencies are resolved.
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 October 31, 2012

Unaudited (in Millions)

Cash and Cash Equivalents $ 1,158

Securities 5

Total Non-Segregated Unallocated Assets on Hand $ 1,163

The Trustee believes a 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 statistics are still under evaluation and are subject to revision. 

Overview of the Customer Claims Process

1. Includes 559 claims timely asserted as securities customer claims that the Trustee has reclassified as commodities customer claims and 108 claims asserted as general 

creditor claims that the Trustee has reclassified as commodities customer claims.

2. Includes claim determinations for which the claimants have executed releases and/or for which the period to object has expired.

3. Includes claim determinations for which the period to object is still running.

4. These 6 claims are currently undergoing the final determination process.

5. Includes objections that are resolved in principle.

Commodities Customer Claims Securities Customer Claims

Total Timely Claims Asserted 27,4961 428

Determined And Final Claims2 27,474 418

Determined But Not Final Claims3 22 4

Undetermined Claims 0 6

4

Total Claims Determined 27,496 422

Commodities Customer Claims Securities Customer Claims

Total Objections to LODs 466 23

Resolved Objections5 340 0

Pending Objections 126 23

Discrete Objections (as of December 3, 2012)

Claims (as of December 3, 2012)
EXHIBIT 3
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 statistics are still under evaluation and are subject to revision. 

Summary of Unresolved Commodities 

Customer Claim Objections

1. The 126 unresolved objections relate to 167 filed customer claims.

Claim Type/Issue Number of Unresolved Objections

Late Claims 38

Account Valuation Disputes 28

Commissions 11

Affiliate Objections 8

Introducing Broker Security Deposits 6

Non-Public Customers 5

Claimants Allege Error in MFGI Records 4

Empty Accounts 4

Claimants Allege Fraud 3

Trading Margined by Letters of Credit 3

Accounts Financed by FinCo 3

Miscellaneous Others 13

Total Pending Commodities Customer Claim Objections 1261

Unresolved Commodities Customer Claim Objections (as of December 3, 2012)