JPMorgan Says Hedge Funds Have Finger On Scale In MF Global Case

Feb 28 2013 | 10:57am ET

JPMorgan Chase says that the hedge funds behind MF Global Holdings' repayment plan aren't playing fair.

In a bankruptcy court filing Tuesday, the bank said that Cyrus Capital Partners, Knighthead Capital Management and Silver Point Capital are using a "pocket veto" to block its effort to recover nearly $1 billion it lent MF Global just before the futures brokerage collapsed. JPMorgan said the hedge funds are refusing to tell creditors what will happen if they vote "no" on their repayment plan, all but forcing them to vote "yes," even if that means claims will never be pursued.

"By denying information to voters about the result of a 'no' vote, the Creditor Co-Proponents are trying to unfairly influence the voting on the plan," JPMorgan wrote.

The bank is seeking permission to file a lawsuit of its own, going after $928 million of the $931 million it lent to MF Global in October 2011, just days before it filed for bankruptcy. MF Global quickly transferred the $928 million to a subsidiary, MF Global Finance USA, which JPMorgan says creates a claim of the subsidiary against the parent that is not being pursued.

Instead, JPMorgan complains, the hedge funds' plan double-counts the $928 million, diluting the possibility of recovery.

The hedge funds have argued that JPMorgan should be temporarily barred from suing, as such an action would delay repayment.

Hedge fund Aurelius Capital Partners is backing JPMorgan's bid.


In Depth

Debunking Conventional Investment Wisdom

Feb 8 2017 | 3:22pm ET

Due diligence in the hedge fund world has long involved some combination of the...

Lifestyle

'Tis the Season: Wall Street Holiday Parties Back In Fashion

Dec 22 2016 | 9:23pm ET

Spending on Wall Street holiday parties has largely returned to pre-2008 levels...

Guest Contributor

iCapital Network: The Trump Effect On Direct Lending

Feb 23 2017 | 4:21pm ET

The arrival of the Trump Administration has raised questions among private debt...