Legal authorities unwinding the brokerage operations of MF Global Holdings Ltd. in the U.S. and U.K. could be heading for a legal clash over $600 million to $700 million in customer money that both sides consider to be their responsibility.
James Giddens, the U.S. trustee unwinding MF Global's domestic brokerage unit, on Friday disputed the stance of KPMG, which is unwinding MF Global's London-based arm, over the legal classification of the money.
"We would hope to resolve it, but this certainly could end up in a U.K. court," a spokesman for Mr. Giddens said on Friday. Mr. Giddens has retained legal counsel in the U.K. in advance of any legal skirmish, according to the spokesman, Kent Jarrell.
The disputed funds don't make up part of the $1.2 billion in customer money that remains unaccounted for, he said. That means if it can't be returned, clients in the U.S. might have lost close to $2 billion in various accounts at MF Global across the world.
Officials for KPMG weren't immediately available for comment.
The dispute highlights the lengthy and messy process of returning billions of dollars in customer funds, which has dragged on for nearly two months after MF Global's Oct. 31 bankruptcy filing. The effort has been complicated by the estimated $1.2 billion shortfall in customer money that has yet to be fully understood by regulators and investigators, including the Federal Bureau of Investigation.
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Mr. Jarrell said Friday that both Mr. Giddens and KPMG see the $600 million to $700 million in question falling under their respective jurisdictions. The picture is clouded because the U.S. and U.K. maintain different bankruptcy and regulatory regimes.
No funds used to back up transactions on international exchanges have been returned yet, according to Mr. Jarrell, and authorities haven't settled on just how much money is out there.
KPMG aims to carry out its own "interim distribution" of the funds, according to a statement last week from Richard Heis, joint special administrator of MF Global UK for KPMG.
A series of asset transfers has reunited former clients with 72% of the property held in U.S. segregated accounts, which had been used to trade on futures markets like the New York Mercantile Exchange and the Chicago Board of Trade. The trustee has estimated that the total U.S. figure could be at least $5.9 billion.
About 80% of MF Global customer funds linked to non-U.S. trading are likely in the U.K., a hub for trade in metals and contracts linked to short-term European interest rates, according to Mr. Jarrell. Nearly all of the 1.6 million open trading positions of customers have been closed or transferred since KPMG took over as administrator of MF Global's U.K. arm Oct. 31, the firm reported last week, representing more than $1.5 billion in collateral.
—Marietta Cauchi contributed to this article.
Write to Jacob Bunge at jacob.bunge@dowjones.com
MF Global Holdings Ltd., KPMG, MF Global, MF Global, customer funds, MF Global customer
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