JPMorgan Chase & Co.
) has reached a $546 million settlement with the trustee of MF
Global Holdings Inc. The money will be eventually returned to the
customers of the brokerage firm that went bankrupt in 2011.
Under the settlement terms, with the trustee entrusted with the
task to liquidate MF Global Inc - the botched broker dealer unit
of MF Global Holdings, JPMorgan will shell out $100 million,
which will be paid to former MF Global customers. Further,
JPMorgan will pay out $29 million of the brokerage's funds held
by the bank, while discharging claims on $417 million that was
earlier returned to James Giddens - the trustee.
The settlement is yet to be approved by the court. JPMorgan is
expected to sustain an expense of about $107.5 million involved
with the settlement, inclusive of attorney fees. The remaining
settlement amount was largely MF Global money held by JPMorgan.
JPMorgan was the main bank among others that had provided a $1.2
billion loan to MF Global and was one of its chief clearing banks
at the time the broker dealer went bankrupt. The bank had
retained certain claims on some of the collateral posted by MF
Global that led to the legal hazard.
Besides the tussle with JPMorgan, the trustee has also requested
the bankruptcy court to authorize a distribution of $250 million
to ↓previous MF Global customers who traded on U.S. exchanges and
another $50 million to those who traded on foreign exchanges, as
per the filing.
MF Global holdings had filed for bankruptcy in Oct 2011, after
registering huge losses on account of a massive trading debacle
pertaining to Europe's sovereign debt. In MF Global case, the
customers money (nearly $1.6 billion) simply vanished a week
before MF Global went insolvent. As mentioned earlier, JPMorgan
was handling the funds at that time.
We view the settlement as a prudent measure from JPMorgan as it
would have resulted into a costly litigation affair for the bank.
MF Global is not the only problem faced by JPMorgan currently.
Over the past couple of years, it has been deluged with lawsuits
alleging legal malfeasance.
Earlier this week, Freddie Mac dragged JPMorgan and a dozen
other banks including biggies like
Bank of America Corporation
Credit Suisse Group AG
) to court accusing them of manipulating London Interbank Offered
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Currently, JPMorgan retains a Zacks Rank #2 (Buy).