* Court OKs release of $520 mln customer cash
* Payout to more than 23,000 customers to start by Nov. 21
* Global retail head Randy MacDonald leaves company
By Nick Brown and Jonathan Stempel
NEW YORK, Nov 17 (Reuters) - The trustee liquidating MF Global Holdings Ltd's broker-dealer unit won court permission to distribute $520 million of cash to customers, 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.
Later on Thursday, the company announced J. Randy MacDonald, its global head of retail, was no longer employed.
The company said in a U.S. Securities and Exchange Commission filing that MacDonald had "ceased to be employed" and would not receive severance or termination payments.
MacDonald was owed $8.9 million in severance, according to a July proxy filing. His departure comes two weeks after MF's chief executive, former New Jersey governor and Goldman Sachs head Jon Corzine, resigned without taking roughly $9 million in severance.
Chief Operating Officer Bradley Abelow, also entitled to about $9 million in severance, is still employed. A spokeswoman for MF Global did not return a call seeking comment on Thursday.
MF, which went bankrupt October 31, laid off nearly half its staff, including more than 1,000 employees of the company's broker-dealer unit.
The payout approved by Glenn on Thursday represents 60 percent of the $869 million that was frozen since Oct. 31 across commodity customer accounts that contained only cash, bankruptcy 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.
Independent trader James Meyer, who had several accounts with MF Global totaling about $200,000, said he has "lost faith in the concept of segregated funds," adding that the U.S. Commodity Futures Trading Commission "abdicated its responsibility to" protect commodities traders.
"The mantra in commodities has always been that never in managed futures has a penny been lost because of the strength of segregated accounts," Meyer, 63, told Reuters. "That's no longer a valid slogan."
At the court hearing in New York, Glenn set 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's bankruptcy came after the New York-based company revealed 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.
Federal prosecutors, the SEC and the Commodity Futures Trading Commission are investigating how MF Global collapsed in the seventh-largest U.S. bankruptcy.
The U.S. Attorney's office in Manhattan has opened a grand jury probe into the missing funds. The CFTC 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.
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?" the judge told one objector. "That could take months."
Regardless of the efficiency with which customers are paid back, some have lost faith in the futures market.
Barnhardt Capital Management, a Lone Tree, Colorado-based commercial hedge broker specializing in cattle and grain, said on Thursday it is shutting down operations after six years for an "excruciatingly simple" reason.
"I could no longer tell my clients that their monies and positions were safe in the futures and options markets -- because they were not," Ann Barnhardt, the firm's founder, said in a statement on the company's website.
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 suggested in a report on Wednesday 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.