NEW YORK — MF Global on Tuesday denied accusations of shortfalls in its brokerage customers’ accounts, one day after filing the eighth-largest corporate bankruptcy in history.
After being pressed by Judge Martin Glenn of U.S. Bankruptcy Court in Manhattan about news reports of depleted customer accounts, Skadden, Arps, Slate, Meagher & Flom LLP’s Kenneth S. Ziman, an MF Global lawyer, said certain funds in those accounts are simply “slow to clear.”
“To the best knowledge of management, there is no shortfall,” Ziman said.
The Wall Street Journal reported earlier Tuesday that MF Global officials had admitted that money had been diverted from customer accounts and later reported that the FBI was taking steps toward a criminal probe of the firm.
During a break in Tuesday’s bankruptcy-court hearing, Brad ley Abelow, MF Global’s president and operations chief, declined to comment on reports of the diversion of customer funds.
At the hearing, Ziman painted a gloomy picture of the prospects of MF Global, which former New Jersey Gov. Jon Corzine took over as chief executive in March 2010. Corzine directed MF Global to invest heavily in European sovereign debt in bets that have gone sour in recent months.
“There is not at this moment of time a substantial amount of liquid assets (at MF Global),” Ziman said.
At Tuesday’s hearing, the company sought to use the cash collateral securing its lenders’ claims for “a little bit of a lifeline, to do some work, to see if we can survive outside of the regulated businesses,” Ziman said.
