UPDATE: MF Global Strikes Settlement With J.P. Morgan Over Claims

By Joseph Checkler
MF Global Holdings Ltd. has struck a deal with J.P. Morgan Chase & Co. ( JPM ) that calls for the bank to pay MF Global a portion of what the bank recovers in the case, a settlement that MF Global’s administrator says avoids “years of costly and complex litigation.” In a Wednesday filing with the U.S. Bankruptcy Court in Manhattan, MF Global laid out settlement terms that call for J.P. Morgan to pay MF Global based on how much it recovers on its claim against the trustee unwinding the company’s brokerage. The higher the amount J.P. Morgan recovers, the higher percentage MF Global gets to return to its creditors. If the amount is higher than $50 million, for instance, every dollar after the $50 million will go to MF Global’s estate. In return, J.P. Morgan would be off the hook for any claims against it in MF Global’s bankruptcy case. The settlement, if approved by Judge Martin Glenn at a hearing currently scheduled for Aug. 22, would bring to an end one of the remaining uncertainties in MF Global’s 21-month-old bankruptcy. More on Nasdaq [...]

SEC goes after the ‘Bitcoin Bernie Madoff’

DENVER (MarketWatch) — There doesn’t seem to be a shred of evidence that alleged Ponzi schemer Trendon T. Shavers took a dime from anyone. He took bitcoins. Nevertheless, the Securities and Exchange Commission filed civil fraud charges against Shavers on Tuesday for cheating about 66 so-called investors from Connecticut, Hawaii, Illinois, Louisiana, Massachusetts, North Carolina, and Pennsylvania. Some are calling Shavers, a 30-year-old from McKinney, Texas, the “Bitcoin Bernie Madoff.” The SEC says his alleged “sham” amounted to more than $4.5 million worth of bitcoins. He allegedly diverted some bitcoins for his own personal use, selling them for cash to pay rent, automobile expenses, meals, assorted retail purchases and casinos, the SEC said. More on MarketWatch [...]

SAC Capital Indictment Does Not Mean The End Of ‘Too Big To Jail’

The feds finally seem to have gotten over their fear of bringing criminal charges against a financial company — but that doesn’t mean they have lost their anxiety that some companies are just “too big to jail.” The U.S. Attorney for the Southern District of New York on Thursday filed a grand-jury indictment against SAC Capital Advisors, the $15 billion Stamford, Conn., hedge fund run by billionaire Steven A. Cohen. The indictment accuses SAC Capital of “insider trading that was substantial, pervasive and on a scale without known precedent in the hedge fund industry.” The government says SAC made “hundreds of millions” of dollars on insider trading over more than a decade, and it wants all of that money back. The charges could well mean the end of SAC, which employs about 1,000 people, according to Reuters. More in the Huffington Post [...]

Judge grants investors rare early discovery in securities case vs SAC

It’s safe to say that the besieged hedge fund SAC Capital has lots more to worry about than a class action by investors in Elan Corporation, one of the companies whose shares the fund supposedly traded on the basis of inside information. The New York Times and The Wall Street Journal reported Wednesday that federal prosecutors in New York are on the verge of indicting SAC, the culmination of an insider trading investigation in which four onetime fund employees have pleaded guilty and two more, including the star portfolio manager Michael Steinberg, are facing criminal charges. SAC founder Steven Cohen is busy defending against Securities and Exchange Commission allegations that could knock him out of the industry, and SAC outside investors have pulled $5 billion out of the fund. Amid those woes, a ruling Tuesday by U.S. Magistrate Kevin Fox of Manhattan – granting Elan investors early access to materials the SEC and the Justice Department have turned over to former SAC portfolio manager Mathew Martoma – is the equivalent of a flea bite. But for the securities class action bar, Fox’s order is big news: It’s a very rare instance of a judge permitting shareholders to obtain discovery before they’ve survived a defense dismissal motion. More on Reuters [...]

Corzine seeks to dismiss trustee’s lawsuit over MF Global collapse

Jon Corzine and two of his top executives at defunct commodities brokerage MF Global sought Monday to have dismissed a lawsuit accusing them of hastening the firm’s 2011 collapse. In court papers filed on Monday in U.S. Bankruptcy Court in Manhattan, lawyers for Corzine, former Chief Operating Officer Bradley Abelow and former Chief Financial Officer Henri Steenkamp lambasted allegations that they acted with gross negligence as the company teetered on the brink. Louis Freeh, the trustee that wound down MF Global’s bankrupt parent, filed the lawsuit in April, accusing Corzine of pursuing a high-risk business strategy that culminated in the brokerage’s destruction. More on Reuters [...]

New York Probes Bloomberg Reporters’ Access to Information

New York Attorney General Eric Schneiderman’s office is looking into how much access Bloomberg LP news reporters may have had to information about the media and technology company’s customers, said people familiar with the inquiries. Officials in the New York Attorney General’s investor protection unit in recent weeks have queried Bloomberg about reporters’ knowledge of terminal subscribers’ activities, said the people. The Attorney General’s office has not opened a formal investigation into the Bloomberg practices, said one of the people familiar with the probe. A Bloomberg spokesman had no comment on any interaction with the Attorney General’s office. Dow Jones & Co., publisher of The Wall Street Journal, competes with Bloomberg in financial news. More in the Wall Street Journal [...]

Kirkland, Morgan Lewis, Manatt, Dentons: Business of Law

Robert Khuzami, the former head of enforcement at the U.S. Securities and Exchange Commission, is joining Kirkland & Ellis LLP, the law firm said. Mark Filip, a partner in charge of Kirkland’s government enforcement defense and internal investigations, said Khuzami will help immediately in securities enforcement defense, advising boards and companies and counseling financial institutions on securities regulations. He will complement the firm’s general white-collar, internal investigations, and private class-action securities practices, Filip said yesterday in an interview. Khuzami, 56, a former federal prosecutor and top lawyer at Deutsche Bank AG, took over the SEC’s enforcement division in 2009 under Mary Schapiro, who was hired as chairman to help restore the agency’s image after it was battered for missing Bernard L. Madoff’s Ponzi scheme. Khuzami carried out the biggest shakeup in the enforcement unit’s history, eliminating management layers, expanding investigators’ powers and creating five specialized units to police Wall Street. More on Bloomberg [...]

Finra Starts Disclosing More Mortgage-Bond Trades Under Plan

The Financial Industry Regulatory Authority, as previously disclosed by the non-governmental regulator of brokerages, began releasing more information about trading in government-backed mortgage securities. Finra began releasing trade-by-trade data on specified pool transactions through its Trade Reporting and Compliance Engine, or Trace, the regulator said today in an e-mailed statement. Along with figures on Small Business Administration-backed securities, new disclosures will cover $18 billion in average daily trading. More on Bloomberg [...]

Busting Steve Cohen: How a Minor Charge Threatens a Major Figure

After years of investigations, wiretaps, and coercing cooperation from numerous witnesses, the government’s big insider trading case against hedge fund impresario and long-time target Steve Cohen may come down to a single “failure to supervise” charge. That’s right: No insider trading charges; no criminal charges; and no fraud allegations. It sounds like pretty weak stuff considering what the Feds believe to be the scope of the crime: numerous instances of insider trading at the massive hedge fund that Cohen runs, the Stamford, Connecticut-based SAC Capital — and possibly the direct involvement of Cohen himself in some of those trades. More in Time Magazine [...]

SEC: Cohen failed to prevent insider trading

Steven Cohen, the billionaire manager of one of the largest and most successful hedge funds, was hit with a civil action by federal regulators Friday for allegedly failing to supervise two financial lieutenants accused of insider trading. The action filed by the Securities and Exchange Commission stopped short of accusing the famed founder of SAC Capital and one of the nation’s wealthiest individuals of insider trading himself. But it seeks to bar Cohen from handling investor funds, a penalty that could force him to shutter portfolios that the agency said until recently totaled more than $15 billion. More in USA Today [...]