MF Global Commodity Customers Must Be Paid First, CFTC Says

Nearly three months after the bankruptcy/ theft, the CFTC has suddenly decided to stand up for the investors who were fleeced at MF Global??  Who would have thought that commodity laws requiring customers be made whole first should actually apply when TBTF funds are on the line!?!

MF Global Inc. commodity customers must be paid before all other claimants, including the bankrupt parent company, according to the Commodity Futures Trading Commission.

Court papers by the trustee for MF Global Holdings Ltd., Louis Freeh, contain “errors and misstatements of law” in arguing that commodity laws, which require that customers be “made whole” first, don’t apply to brokerage liquidations, the regulator said in a court filing today.

Freeh, representing the parent company creditors, has said money due to them shouldn’t be “diverted” to customers.

If Freeh was right, “the senseless result would be to render inapplicable the key regulations of the Commodity Futures Trading Commission in the largest commodity broker bankruptcy in U.S. history,” the CFTC said. The result would “strip” customers of a remedy, after they entrusted their assets to the brokerage relying on rules for segregating customer money, it said.

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