The US Commodity Futures Trading Commission (CFTC) has won court approval to intervene in the US$205 million dispute between oil major ConocoPhillips and the bankruptcy trustee for the collapsed commodity broker, MF Global Inc.

The dispute centres on the treatment of US$205 million of letters of credit (L/Cs) posted by ConocoPhillips rather than cash as margin for its trading accounts with MF Global before the commodity broker went bankrupt (DC World News, 11 October 2012).

Court filing

The CFTC's federal court filing argues that it should be allowed to intervene because of the public policy interest in the correct interpretation of law and rules governing the futures industry. A judge approved the commission's application to intervene.

The CTFC is likely to support the trustee, James Giddens, in his argument that the L/Cs should be treated the same as if cash was posted.

Distributions

If this argument is upheld, ConocoPhillips would only be entitled to receive the same percentage in distributions as other creditors and would cost ConocoPhillips tens of millions of US dollars.

The trustee has already returned some money to former MF Global customers, with some kinds of account holders receiving as much as 80 per cent of their cash, though others have received less.

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