WRAPUP 1-CFTC commissioner views MF Global darkly

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* CFTC commissioner suspects nefarious MF Global activity

* Trustee proposes quick claims process for customers

* Customers seek representation on creditors' committee

By Nick Brown and Alexandra Alper

NEW YORK/WASHINGTON, Nov 15 (Reuters) - A U.S. regulator said he thinks "something nefarious" occurred at MF Global, deepening the criticism facing the fallen futures brokerage.

As customers worried about whether they will recoup the full value of their accounts, a trustee winding down MF Global's broker-dealer unit said separately on Tuesday that clients may be able to submit claims for losses within weeks.

Bart Chilton, a Democratic commissioner at the U.S. Commodity Futures Trading Commission, told Reuters Insider that U.S. regulators are closer to finding out what happened to roughly $600 million in missing customer money.

"The money is not where it should be. I think something nefarious has happened, potentially something illegal," he said.

MF Global , which lost on big bets on European debt, filed for bankruptcy on Oct. 31 after a deal to sell itself to Interactive Brokers Group fell apart.

A huge shortfall was discovered in the customer accounts of the company's brokerage, and the CFTC is among the authorities investigating whether MF Global may have improperly mixed that money with its own funds.

An MF Global representative was not immediately available for comment. Neither MF Global nor its former chief executive, Jon Corzine, has been charged with wrongdoing.

PAYING OUT WHAT'S THERE

There are growing concerns that regulators may be unable to find the missing customer funds, or that the money may be tied up in other assets.

Dealing with those concerns is primarily the job of James Giddens, the trustee.

Giddens on Tuesday took a step toward getting customers some of their money back, asking MF Global's bankruptcy judge, Martin Glenn, to approve an expedited process whereby commodities customers would submit all claims by Jan. 27.

In a court filing, Giddens described a proposed process for mailing claims forms, reviewing claims and making payouts "as promptly as possible," likely in increments.

The process is set to be discussed at a hearing before the judge in U.S. Bankruptcy Court in Manhattan on Wednesday.

If Giddens and federal regulators are unable to find the missing customer cash, customers with commodities trading accounts could be forced to take significant losses.

While it charts its course through bankruptcy, MF Global is surviving on $8 million in cash that had been collateral for JPMorgan Chase & Co , the agent for a $1.2 billion syndicated credit line.

MF said in a Monday court filing that it has extended through Nov. 21 its window for spending that cash, giving it five extra days to seek longer-term funding.

Whether it can find such funding will impact the nature and speed of its restructuring or liquidation.

ANGRY CUSTOMERS

Customers have clamored for resolution of the missing money issue. Several customers have asked Glenn to appoint a customer representative to the official committee of unsecured MF Global creditors.

Typhon Capital Management CEO James Koutoulas, who has separately asked Glenn to invalidate a lien putting JPMorgan ahead of customers for payback, told Reuters on Tuesday he may seek formal permission to join the committee.

Two current members of the committee, meanwhile, want permission to keep trading MF Global securities during bankruptcy.

Bank of America and Elliott Management Corp each filed court papers asking Glenn to allow them to trade stock, debt and other MF Global securities as long as they impose systems to separate their trading from their role on the committee.

Judges in a few major bankruptcies, including Lehman Brothers , WorldCom and Enron, have allowed such trading by creditors' committee members, Bank of America said in its court papers seeking permission for the trades.

MF's bankruptcy case is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.

The brokerage liquidation is In re MF Global Inc, in the same court, No. 11-2790.

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MF Global fires brokerage staff en masse

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1 of 2. An unidentified man exits the building that houses MF Global offices in New York November 11, 2011. MF Global fired all 1,066 of its brokerage employees on Friday, triggering anger and resentment about the firm's collapse after bad bets on European debt under former CEO Jon Corzine's leadership.
Credit: Reuters/Brendan McDermid
By Clare Baldwin, Greg Roumeliotis and Sam Nelson
NEW YORK/CHICAGO |
NEW YORK/CHICAGO (Reuters) - MF Global fired all 1,066 of its brokerage employees on Friday, triggering anger and resentment about the firm's collapse after bad bets on European debt under former CEO Jon Corzine's leadership.
How the abrupt, final blow was delivered upset many staff -- with some learning by e-mail and others through news on the television.
"Fifteen years and no severance!" shouted one angry MF Global employee as he left the firm's offices on 5th Avenue in Manhattan after hugging the receptionist and doorman.
The trustee in charge of liquidating the brokerage said in a statement that the workers were let go immediately, though they will be paid through November 15 and up to 200 will be rehired to help with the wind-down.
The timing couldn't be worse for the employees. Not only is the U.S. unemployment rate high at 9 percent, other Wall Street firms have been firing staff in recent months as trading profits decline and tighter regulation takes hold.
"The lives of so many people have been disrupted. We did not even get told individually, we got a group e-mail," said MF Global analyst Pierre-Yvan Desparois outside the company's offices in Manhattan.
"The company had a lot of potential, it did not have to end like this. I'm a credit analyst and I could have told Corzine not to invest 100 percent in the sovereign debt situation. He placed bets with people's lives," said Desparois.
A middle-aged man who said he had worked for MF Global for 23 years but who declined to give his name left another of the firm's New York offices wearing a black t-shirt over his collared shirt that was laced with profanity.
At the Chicago Board of Trade, one MF Global employee sat in silence after a Reuters reporter told her about the mass layoffs. "No, I hadn't heard yet," she said, after a moment.
Asked about colleagues who were let go earlier this week, she said some have put on a brave face about landing another job. "But I told them, this is totally different because people are finding it hard to find jobs for 12, 18 months."
The criticism of Corzine was echoed by Todd Thielmann, a broker with MF Global in Chicago.
"His ego has ruined a lot of lives," said Thielmann. "It was more about the execs at the company than the grunts."
Another employee who worked in market data at the firm in New York for three years said she would have never left. "It was a great job. The camaraderie, the company was great. But people at the top let us down. It came as a complete shock," she said.
Not every employee saw the pink slip e-mail, and not everyone was surprised.
A broker in Chicago learned about the termination through news reports and said employees were being called into meetings as the media began reporting the development.
"When you are working for a company that is bankrupt, you know it's coming," said an MF Global broker who attended a 20-minute meeting in New York.
MONEY STILL MISSING
The firings come as the trustee, James Giddens, works to identify and locate the brokerage's assets, including $600 million in missing customer money that has frustrated and confused commodity-market traders.
MF Global's main U.S. exchange regulator, CME Group Inc, said on Friday it will provide a $300 million guarantee to prod the trustee into releasing frozen customer funds. For the first time, CME tapped a slush fund for about $50 million to help offset any losses to futures traders stemming from the failure.
Giddens is trying to account for all of MF Global's assets with help from forensics investigators at Ernst & Young. The trustee said he has also retained Deloitte to help with the transfer of about 17,000 commodities accounts worth roughly $1.5 billion.
Federal agencies, including the Commodity Futures Trading Commission, the Securities & Exchange Commission and the Department of Justice, are investigating whether the money missing from customer accounts may have been improperly mixed with the firm's funds.
Giddens was appointed to liquidate the brokerage after MF's parent company declared bankruptcy on October 31.
The bankruptcy shocked Wall Street, in part because the company was run by former New Jersey Governor and Goldman Sachs head Jon Corzine, who advocated for tough regulations on Wall Street firms during his political career.
Corzine resigned last week, saying he would not seek about $9 million in severance.
SOME WILL BE REHIRED
Between 150 and 200 of the MF Global brokerage employees will be rehired to help with winding down the business and processing bankruptcy claims, Giddens said in his statement.
"The termination of employees and closure of operations is a necessary part of the court-ordered liquidation ... and is consistent with the trustee's obligations," he said.
The parent, MF Global Holdings, said in a statement that it was "saddened by the trustee's actions today to terminate so many of our colleagues."
Giddens also said on Friday that his team is working to clear out the brokerage's New York offices as soon as possible and rent smaller, less expensive space as the liquidation moves forward.
MF Global's Chicago offices will continue to be leased for an undetermined amount of time, he said.
As for the employees, they are heading off into the great unknown.
"We were down to eight people on the floor and only two of them have found jobs," said Thielmann, who plans to start over as an independent broker in the corn options pit trading floor of the CBOT.
"I'm on my own now but it's going to be really hard to get customers. They're scared, they've taken any excess money out of all firms now and they don't know who to trust. Customers are pulling funds out of accounts, that's bad for liquidity and bad for markets," he said.
The brokerage liquidation is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790.
MF's bankruptcy case is In re MF Global Holdings Ltd, in the same court, No. 11-15059.
(Additional reporting by Nick Brown, Dan Wilchins and Jonathan Spicer in New York; and Theopolis Waters, Ann Saphir and T. Arasu in Chicago; Writing by Edward Tobin; Editing by Martha Graybow, John Wallace, Tim Dobbyn and Bernard Orr)

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