A U.S. judge refused to block former MF Global Holdings Ltd Chief Executive Jon Corzine and other company officials from tapping as much as $30 million of insurance money to defend lawsuits over the futures brokerage's collapse.
Judge Martin Glenn of the U.S. bankruptcy court in Manhattan on Monday rejected a request by three plaintiffs including Sapere Wealth Management LLC to put the funds' release on hold while they appeal his April 10 decision allowing officials to access the money.
Many one-time customers of MF Global, which filed for Chapter 11 bankruptcy protection six months ago, believe the funds should be set aside for them and not go to executives they hold responsible for the company's bankruptcy.
"Settled case law...establishes that the individual insureds cannot be denied contractually provided insurance protection when their employers are insolvent because others may have claims on the insurance policies," Glenn wrote in a brief order.
A lawyer for Sapere did not immediately respond to requests for comment.
In his April 10 decision, Glenn wrote that MF Global officials facing lawsuits would "suffer significant hardships" if they could not tap their insurance policies.
Last Monday, the U.S. Judicial Panel on Multidistrict Litigation consolidated more than 20 lawsuits by MF Global shareholders and customers into a single case in Manhattan federal court.
MF Global filed for Chapter 11 bankruptcy protection amid a liquidity crunch prompted by worries over its $6.3 billion bet on European sovereign debt.
About $1.6 billion of customer money remains missing, the trustee for the MF Global Inc brokerage unit has estimated. Corzine testified before the U.S. Congress in December that he did not know where the missing money is.
The cases are In re: MF Global Holdings Ltd et al, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059; and In re: MF Global Inc in the same court, No. 11-02790.