MF Global reaches $64.5M investor settlement

NEW YORK — Former MF Global Holdings chief executive Jon Corzine and other ex-officials who worked with him have reached a $64.5 million tentative settlement with investors who sued them over the failed brokerage's 2011 bankruptcy implosion.

Disclosed by a Tuesday filing in Manhattan federal court, the agreement in the class-action lawsuit would close one of the last major lawsuits involving claims brought by investors of the now-defunct brokerage that was based in New York City.

The collapse, Wall Street's largest since the 2008 failure of Lehman Bros., was triggered in part by $6 billion in badly-timed investments on debt of Ireland, Italy, Portugal, Spain and other European nations. The investments were part of a strategy in which Corzine, a former U.S. senator, New Jersey governor and Goldman Sachs chief executive, planned to transform MF Global into an investment bank.

But as the European economy weakened, MF Global was hit by margin calls and credit downgrades by rating agencies concerned about the brokerage's increasing debts. MF Global officials used more than $1.6 billion in customer funds to cover liquidity shortfalls in a failed attempt to head off the bankruptcy filing that ultimately came in October 2011.

Combined with $74.9 million in approved settlements with several underwriting defendants in another case and a proposed $65 million settlement with auditing firm PricewaterhouseCoopers in a third, the tentative settlement would raise the investors' recovery to $204.4 million.

The new settlement, like the PwC agreement, requires federal court approval.

The $204.4 million combined total represents 18% of the amount that lead plaintiffs the Virginia retirement system and the Canadian province of Alberta estimated as the maximum damages that could be reasonably recovered.

"These are excellent recoveries in the face of the risks plaintiffs faced and the inability of MF Global to contribute to any settlement given its bankruptcy," attorneys for the group wrote in memorandum of law filed in federal court Tuesday.

Separately, thousands of former MF Global customers have recovered $6.7 billion, the amount court trustee James Giddens said they were owed by the failed brokerage.