(Reuters) ? A shortfall in customer funds at MF Global Holdings' (MFGLQ.PK) broker-dealer unit grew in the days before the company went bankrupt, as client money increasingly was used to pay for MF's daily activities, said the trustee liquidating the broker-dealer.
James Giddens, the trustee for MF Global Inc, said in a statement Monday that his investigation has revealed that MF Global personnel increased the company's use of customer money as liquidity dried up in the five days leading up to the bankruptcy of its parent, MF Global Holdings Ltd.
The trustee has not changed his estimate that a total of about $1.2 billion is missing from customer segregated accounts, said Kent Jarrell, a spokesman for Giddens.
Giddens said that his investigation found that as part of MF Global's regular practices, the company used customer money in small amounts of less than $50 million for corporate needs.
But Giddens said that as MF Global's financial position worsened last fall, with exposure to $6.3 billion in risky European debt, "much larger amounts" of customer money were used, "apparently with the assumption that funds would be restored by the end of the day."
The end result was that the company could not replenish customer accounts. MF Global's parent filed for bankruptcy on October 31.
Giddens said his legal team has traced a majority of cash transactions, totaling more than $105 billion, made in the last week prior to the bankruptcy.
Giddens said he is working with third parties to seek more complete information about transfers to "select" parties prior to that bankruptcy.
Jarrell also said it is unknown when he will be able to make more distributions to former customers.
"We're just about out of money to give back," he said. "We have a reserve, but we have to keep it in case claims come against us."
(Reporting By Jonathan Stempel and Nick Brown; Editing by Phil Berlowitz and Tim Dobbyn)
Source: http://finance.blogrange.com/finance-news/mf-global-shortfall-worsened-as-bankruptcy-neared/
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