The trustee liquidating MF Global Holdings Ltd's broker-dealer unit won court permission to distribute $520 million of cash, providing relief to customers whose accounts have been frozen since the futures brokerage went bankrupt.

U.S. Bankruptcy Judge Martin Glenn approved the payout at a hearing on Thursday in Manhattan.

The payout is 60 percent of the $869 million that was frozen since Oct. 31 across commodity customer accounts that contained only cash, the trustee James Giddens has said.

Still unclear is the whereabouts of about $600 million of customer funds that have been unaccounted for since MF Global's Chapter 11 filing, and whether MF Global might have improperly mixed customer funds with its own.

Glenn turned aside objections by some customers who faulted the trustee for not distributing more, and others who complained that they were ineligible to join in the payout.

Nothing in the law requires that all customers receive similar rates of distributions at the same time, he said.

Kent Jarrell, a spokesman for the trustee, said after the hearing that about 23,300 customers will be entitled to share in the payout, which is expected to begin by Nov. 21. A few hundred accounts would remain frozen, he said.

MF Global was run by former Goldman Sachs & Co chief and New Jersey governor Jon Corzine before its Chapter 11 filing on Oct. 31.

The filing came after the New York-based company revealed that it made a $6.3 billion bet on European sovereign debt. Customers and counterparties began to flee, resulting in margin calls and a liquidity crunch. Corzine resigned on Nov. 4.

Investigators including federal prosecutors, the Securities and Exchange Commission and the Commodity Futures Trading Commission are examining the missing funds and possible commingling of funds as they examine why MF Global collapsed in the seventh-largest U.S. bankruptcy.

OBJECTIONS

MF Global had 38,000 accounts under Giddens' control, with 14,500 having been transferred previously to other brokerages.

Thursday's approved payout covers customers who had only cash or cash equivalents, such as U.S. Treasury bills, in their accounts on Oct. 31, the day MF Global went bankrupt. It does not cover customers who liquidated their holdings later.

Commodities traders and exchanges said the freeze on the cash-only accounts punished customers who liquidated their trading positions before MF Global's bankruptcy.

Glenn advised the remaining customers whose funds are still tied up to be patient, agreeing that the trustee's plan is intended to return money to customers as soon as possible.

Do you want everybody held hostage until the trustee can come up with a more global solution? Glenn told one objector. That could take months.

The U.S. Attorney's office in Manhattan has opened a federal grand jury probe into the missing funds. The Commodity Futures Trading Commission has subpoenaed Bank of Montreal's Harris Bank unit for information about MF Global customer accounts, two people familiar with the matter said.

Subpoenas have also been issued by the U.S. Attorney's office in Chicago, the Wall Street Journal said on Wednesday, citing people familiar with the matter. That office declined to comment.

Also on Thursday, CME Group Inc , which runs the world's largest futures exchange, said it learned early on Oct. 31 of a shortfall in MF Global's segregated funds account, and told the CFTC and other regulators shortly thereafter. It said it is confident it complied with its regulatory obligations.

The statement was issued after Goldman analyst Daniel Harris on Wednesday suggested in a report that CME's stock price has been under pressure owing to worries it may face liability over the timing of its communication with the CFTC. He has a neutral rating on CME stock.

Meanwhile, IntercontinentalExchange on Thursday said its ICE Clear U.S. affiliate has completed the transfer or closure of all MF Global customer positions.

The cases are In re: MF Global Holdings Ltd et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059; and In re: MF Global Inc in the same court, No. 11-02790.