CHICAGO Jan 18 INTL FCStone said on
Friday it will appeal a federal court ruling ordering it to
return $15.6 million to the trustee overseeing the bankruptcy of
Sentinel Management Group.
FCStone, a New York-based commodities brokerage with many
farmers for clients, had to return the funds to the trustee
because a distribution to former Sentinel clients was unfair,
U.S. District Judge James Zagel ruled.
Zagel on Thursday ordered FCStone to post an $8 million cash
deposit with the U.S. Circuit Court for the Northern District of
Illinois pending a judgment in the appeal.
Sentinel managed investments for clients, including FCStone,
until it collapsed in 2007, when prosecutors say that executives
moved customer money out of protected accounts to be used as
collateral for loans to Sentinel's own trading operations.
Two former Sentinel executives were charged in 2012 with
defrauding customers out of more than $500 million before the
futures brokerage failed.
Futures brokers are required to keep customers' funds in
dedicated accounts to protect them from being used for anything
other than client business.
FCStone received about 70 percent of the money it had
invested with Sentinel, while other clients only got about 35
percent of their money, according to the trustee.
If it loses the appeal, FCStone estimates its pre-tax loss
at $4 million and $6 million.
Since Sentinel failed, brokerages MF Global and Peregrine
Financial Group went bankrupt in 2011 and 2012, respectively,
after misusing customer money. The bankruptcies have shaken
confidence in the futures industry.
The case is Sentinel Management Group, Inc. v. FCStone LLC,
U.S. Circuit Court for the Northern District of Illinois, No.