Fallout from MF Global Holdings Ltd's bankruptcy intensified as a U.S. regulator subpoenaed a bank that held some of its customers' money, while some of the 1,066 workers fired from the futures brokerage last week filed three lawsuits over their sudden dismissals.
The U.S. Commodity Futures Trading Commission within the last week issued a subpoena to Bank of Montreal's Harris Bank unit, seeking information about customer accounts at MF Global, two people familiar with the situation said.
Prior to MF Global's October 31 bankruptcy, Harris had been the main custodian for customer money deposited with the futures brokerage and kept in segregated accounts.
A spokesman for Chicago-based Harris declined to comment. The CFTC also declined to comment. The people familiar were not authorized to discuss the subpoena publicly.
The subpoena signals that U.S. regulators are stepping up their investigation into the $600 million still missing from MF Global's accounts.
MF Global filed for bankruptcy after its bets on European sovereign debt unnerved investors, credit agencies, customers and counterparties, causing liquidity to disappear.
Chief Executive Jon Corzine, one of Wall Street's best known executives, resigned on November 4. Prior to taking over MF Global, Corzine had been a governor and U.S. senator for New Jersey, and had also run Goldman Sachs & Co.
The Department of Justice and Securities and Exchange Commission are also looking at whether the missing money might have been mixed improperly with company funds.
A federal grand jury probe has been launched, while the FBI has also shown preliminary interest.
James Giddens, the court-appointed trustee liquidating the MF Global Inc broker-dealer unit, is also trying to locate the missing $600 million. Earlier this month, Giddens transferred accounts of about 17,000 MF Global commodities customers to other brokers to save them from liquidation, along with roughly $1.5 billion in collateral associated with those accounts.
Customers who liquidated their accounts prior to MF Global's bankruptcy remain unable to access their cash. One group of customers has filed a lawsuit seeking the release of frozen accounts, while IntercontinentalExchange Inc last week penned a letter to bankruptcy Judge Martin Glenn asking him to release them.
A small number of unliquidated accounts were unable to be transferred, the trustee said in a statement Monday evening. The accounts, totaling about $25 million, will be liquidated, Kent Jarrell, a spokesman for Giddens, told Reuters.
Jarrell did not comment on why the transfers were unsuccessful.
Worker lawsuits were filed in the wake of Giddens' decision on Friday to fire all of the broker-dealer unit's 1,066 workers, effective immediately.
Each seeks class-action status, claiming that workers did not receive 60 days notice of their terminations, as required under federal and New York state labor law.
The lawsuits seek to ensure payment of unpaid wages, bonuses, commissions and other benefits as MF Global works through bankruptcy. They were filed with the U.S. bankruptcy court in Manhattan, and made public on Monday.
Jack Raisner, a lawyer who filed one of the lawsuits, said the lawsuits are intended to ensure the workers are protected and have a voice in the bankruptcy process. Everyone wants to be where the assets are, he said.
Jarrell said the trustee acted appropriately in connection with the job losses.
Separately, Giddens on Friday issued a subpoena to examine employees of the parent company, without publicly naming them.
He also asked for court permission to reject eight MF Global leases and subleases. Among the affected properties are MF Global's 62,000-square-foot Midtown Manhattan headquarters, as well as offices in Boston, Dallas and San Francisco.
Meanwhile former MF Global customers known as the Commodity Customer Coalition in a court filing objected to a lien that JPMorgan Chase & Co got when MF Global won the right to use $8 million of cash collateral held by the bank. The customers said it might jeopardize their rights as creditors.
The worker lawsuits are Thielmann et al v. MF Global Finance USA Inc et al, U.S. Bankruptcy Court, Southern District of New York. No. 11-ap-02880; Sivova v. MF Global Holdings Ltd et al in the same court, No. 11-ap-02881; and Abruzzo et al v. MF Global Holdings Ltd et al in the same court, No. 11-ap-02882. The main bankruptcy case is In re: MF Global Holdings Ltd et al in the same court, No. 11-15059.
(Reporting by Jennifer Ablan, Nick Brown, Matthew Goldstein, Lauren Tara LaCapra, Jonathan Spicer and Jonathan Stempel; Editing by Phil Berlowitz)