A New York judge has given preliminary approval to class action settlements over alleged price manipulation in metal markets that will allow Plaintiffs to file $21.1 million in claims in MF Global Inc.’s bankruptcy and receive more than $6 million in cash. U.S. District Judge William H. Pauley said he was ready to sign off on an order directing notices of the proposed deal to be sent to class members and instructed the lawyers to present him with the necessary documents without delay. The combined settlement would resolve separate class actions alleging manipulation in palladium and platinum futures as well as in the physical settlements of the precious metals.
The settlements will give the futures Plaintiffs the ability to file a claim against MF Global’s estate valued at nearly $18.8 million and will allow the physical commodities plaintiffs to file a more than $2.3 million claim. The Plaintiffs will receive a combined $5.25 million in cash, largely paid by MF Global’s insurer, and around $1 million for assigning their claims against former MF Global trader Joseph Welsh to the company. The settlement also comes with a backstop agreement, allowing the futures Plaintiffs an option to sell the assigned bankruptcy claims to MF Global parent MF Global Holdings whole or in part for 70 cents on the dollar, netting the Plaintiffs a guaranteed $13.1 million if sold in full.
This settlement comes just a few months after Judge William Pauley gave preliminary approval to settlements with hedge fund Moore Capital Management LP and former MF Global trader Joseph Welsh totaling nearly $100 million. The settlements, if approved, bring to a close litigation over a tactic called “banging the close,” a strategy in which a trader enters buy orders in the last seconds of a trading day to drive up futures’ settlement prices.
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