It’s not just the protesters at Zuccotti Park who complain big banks are trampling on the little guy.
Smaller customers of MF Global believe bank giant JPMorgan Chase, run by CEO Jamie Dimon, is angling to cut ahead of them in MF’s long line of creditors.
Some MF clients are planning to file a motion in Manhattan bankruptcy court today, led by James Koutoulas, chief executive of a Chicago commodities trading firm, in a bid to boost their chances of recovery from the eighth-largest bankruptcy in US history.
At issue is a lien and other protections given to JPMorgan, MF’s largest lender, in exchange for an $8 million loan the bank gave to MF on its first day of bankruptcy.
In short, the lien appears to give JPMorgan the right to some assets that creditors might otherwise try to claw back through lawsuits.
The bankruptcy judge in the case, Martin Glenn, acknowledged he doesn’t normally grant such special rights for a lone lender and said he would re-evaluate the matter at a hearing today.
In an interview, Koutoulas called the loan “a farce” and “a cheap ploy for them to jump the line.”
Stanley Haar, owner of a small commodities trading firm in Boca Raton, Fla., who is part of Koutoulas’ group, said if the bankruptcy judge confirms JPMorgan’s lien, “We would automatically be stepped on by the bank.”
A person close to JP Morgan, which declined to officially comment, said the bank is entitled to be lead creditor because it was MF’s biggest lender as the result of a revolving $1.2 billion credit line given to MF before the broker-dealer imploded. “Everyone’s interests are aligned among creditors,” the source said.
MF — run by former NJ governor and ex-Goldman Sachs chief Jon Corzine until Nov. 4 — filed for bankruptcy last month after making big bets on dicey European debt. The details of the messy bankruptcy are still being hammered out, and it’s not clear yet whether any customers will be left standing behind corporate creditors like JPMorgan.
What is known is that $600 million of MF customer funds that were supposed to be segregated from the firm’s dough — and therefore safe from a bankruptcy — have gone missing, throwing the normal order of things out of whack and opening the door to customers fighting with lenders for the remaining assets.
The latter option will devastate customers like Foti Georgiadis, a day trader who had close to $1 million in one of MF’s plain-vanilla brokerage accounts for stock and bond holders.
The Malibu, Calif., investor said he’s been unable to access his account since the bankruptcy and has gotten no word about when or whether his assets will ever be released to him.
“I can’t get out of my positions. I can’t pay my bills. I can’t feed my family,” he said. “Why don’t you just kill me?”
Today’s filing by Koutoulas will request that MF’s customers be given priority over any assets recovered if customer accounts were, in fact, wrongfully co-mingled with the company’s assets.
Koutoulas is also agitating to get a seat on the creditors’ committee, which is currently being led by JPMorgan.
Another subject of some customers’ ire is James Giddens, the trustee put in charge of cleaning up the mess and returning money to customers and creditors.
Several trading clients have asked that Giddens be removed as trustee given his track record with collapsed Lehman Bros.