PFGBest Update: Good News for 30.7 Accounts

After receiving what feels like the 1,000th call from groups buying PFG claims, the trustee’s motion for 30.7 account holders’ money to be treated the as an individual class was approved today by the judge in the PFG case. What does it mean for recovery totals?

Well for one, it means that 30.7 account holders are likely to see almost all of their money, and possibly even 100% of it. For other account holders, it’s a bit more complicated. We have been poring over the PFG balance sheet reported by the trustee – in addition to getting on several calls with the trustee to clarify some points – and after all of that we have come up with the potential recovery levels below based on the assets on hand (i.e not including any additional money received by the estate via class action suits).

We’ve listed the best case recovery scenario at the top – where essentially all of the assets would end up benefiting customer’s 4d balances – and then using the balance sheet and items listed within to calculate how much less 4d customers would recover based on possible outcomes. We then do the same for 30.7 balances, although there are really just two outcomes there – it remains separate, or is combined with 4d and the 4d percentages apply (although slightly higher as the 30.7 balances would be added).

For 4d Balances

If all possible sources go to 4d accounts: 58.37%

Possible Complications:

  • If legal fees double: -1.31%
  • If FX & Metals succeed in getting priority for their funds: -9.49%
  • If 4d customers don’t get priority over the estate: -2.76%
  • If banks succeed in keeping set offs: -6.10%

Our Prediction:

  • FX & Metals don’t get priority
  • Legal fees remain at current pace
  • 4d given priority claim over estate
  • Banks succeed in retaining 50% of set offs

Result: 55.08% recovery

Best Case Scenario: 58.37%

Worst Case Scenario: 43.73%

*#4 & Worst Case assumes customers receive 44% of general estate (less $500k in creditor liabilities, $400k in customer payables)

A couple of things to note:

1. This is all an exercise in estimation and prediction – two highly unreliable fields, and as such should not be taken as official, legal, or any other such. It’s our best guess at this moment, that’s all, meaning the “worst case” scenarios above could still be worse than what we’ve listed.

2.  None of this includes potential recoveries via class action lawsuits, whose success is far from certain. This could substantially add to the recoverable amount if successful against the large banks.  Nor does it include the possibility of “finding” some of the stolen money, however remote. This is only based on money the trustee knows to exist and either has under his control or is working to get under his control.

And what about JP Morgan and the other banks’ efforts to keep the money they claim as a set off? JP Morgan has about $18 million of PFG customer money under dispute saying it is subject to set offs.  We don’t think this should be a very difficult question – after all, they are getting billions of dollars per year from federal handouts… this money is little more than a rounding error to them. Today JP Morgan settled with the MF Global trustee to relinquish their claim over customer funds, and would be nice to see them do the same for PFG customers, too.

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Forex trading, commodity trading, managed futures, and other alternative investments are complex and carry a risk of substantial losses. As such, they are not suitable for all investors.

The entries on this blog are intended to further subscribers understanding, education, and – at times- enjoyment of the world of alternative investments through managed futures, trading systems, and managed forex, and is not intended as investment advice, or an offer or solicitation for the purchase or sale of any financial instrument. Unless distinctly noted otherwise, the data and graphs included herein are intended to be mere examples and exhibits of the topic discussed, are for educational and illustrative purposes only, and do not represent trading in actual accounts. Opinions expressed are that of the author.

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The mention of general asset class performance (i.e. managed futures did well, stocks were down, bonds were up) is based on Attain’s direct experience in those asset classes, estimates of performance of dozens of CTAs followed by Attain, and averaging of various indices designed to track said asset classes.

It should be noted that past market performance is not indicative of future market movement.No market data or other information is warranted by Attain Capital Management as to completeness or accuracy, express or implied, and is subject to change without notice.

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