7 banks targeted over MF Global collapse

Pension funds claim banks concealed problems, seek damages for investors

Ripples from the collapse of MF Global are reaching the courtroom, as investors begin the effort to recover their money. A pair of pension funds filed a lawsuit Friday against seven banks that helped the futures brokerage sell bonds, claiming the bonds’ offering prospectuses hid significant problems.

The seven banks listed as defendants include units of Bank of America, Citigroup, Deutsche Bank, Goldman Sachs, Jefferies, JPMorgan Chase & Co and Royal Bank of Scotland. Several officials associated with MF Global, as well as former Chief Executive Jon Corzine, are also listed.

The complaint said the banks masked risky practices in registration statements and prospectuses for about $900 million of MF Global note offerings this year. The lawsuit said the documents did not disclose how MF Global invested in dangerous European sovereign debt, used high leverage and failed to segregate client assets from its own.

The banks’ “failure to conduct an adequate due diligence investigation was a substantial factor” in MF Global’s collapse, according to the complaint.

Brought by the IBEW Local 90 Pension Fund in Connecticut, and the Plumbers’ and Pipefiters’ Local #562 Pension Fund in Missouri, the lawsuit seeks class-action status, as well as damages for investors between Feb. 3, 2011 and Oct. 31, 2011 in MF Global securities.

Contributing Author

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