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%
- 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%
- 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.