NEW YORK Customers of MF Global's MF.MU failed broker-dealer unit and the trustee overseeing its liquidation won court approval on Wednesday for a $546 million settlement with JPMorgan Chase & Co (JPM.N).
The settlement, announced in March, resolved claims levied by James Giddens, the trustee winding down MF's broker-dealer unit MF Global Inc, and by the broker's former customers, who are pursuing a federal class action over MF Global's collapse in 2011.
MF Global, the commodities brokerage headed by ex-New Jersey Governor Jon Corzine, filed for bankruptcy amid concerns by investors about its exposure to $6.3 billion in sovereign debt.
Approval of the JPMorgan settlement comes a week after the Commodity Futures Trading Commission sued Corzine over the collapse and announced a $100 million settlement with MF's broker-dealer.
At a rare joint hearing in Manhattan, U.S. Bankruptcy Judge Martin Glenn, who is overseeing the liquidation, and U.S. District Judge Victor Marrero, who presides over the class action, approved the JPMorgan accord.
"I find the proposal fair, reasonable and in the best interests of the class," Marrero said.
Giddens has said the settlement will allow him to eventually return 100 percent of customers' money, which was frozen when MF Global went bankrupt. Most customers have already recovered around 90 percent of their funds.
JPMorgan had been the lead on a $1.2 billion revolving credit facility to MF Global's parent and one of its primary clearing banks leading up to its bankruptcy.
Under the settlement, JPMorgan will pay $100 million to benefit former customers. It has also agreed to return more than $29 million in brokerage funds and to release claims on $417 million it earlier returned to Giddens.
The latest settlement also ties up a loose end in Giddens' settlement with MF Global's UK unit, announced earlier this year. That settlement, expected to bring in $500 million to $600 million for the broker-dealer's estate, required a resolution of JPMorgan's claims.
"The overall settlement unlocks over $1 billion for customers and other creditors," James Kobak, the lead attorney for Giddens, said at Wednesday's court hearing.
The bank will make a seperate $7.5 million payment for attorneys' fees and expenses to lawyers representing the customers in the class action, court papers show. Marrero approved the fees Wednesday.
The cases are In re: MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790, and Deangelis v. Corzine, U.S. District Court, Southern District of New York, No. 11-7866.