Andrew Abraham

andy-0101 My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following. Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.

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Futures and commodity trading involve substantial risk. The evaluations of futures and commodities may fluctuate and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or an implied promise, guarantee or implication by, that you will profit, or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible, where projections of future conditions are attempted.



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MF Global Trustee Report

MF Global Inc.’s $1.2 billion in missing customer funds began to move out on Oct. 26 as the company’s computers and employees couldn’t keep up with margin calls and increased demands for collateral, according to a trustee who has traced where most of $105 billion in cash went during the company’s final days. You will be shocked at reading page 10


One Battery Park Plaza
New York, New York 10004
Telephone: (212) 837-6000
Facsimile: (212) 422-4726
Attorneys for James W. Giddens,
Trustee for the SIPA Liquidation of MF Global Inc.
In re
Case No. 11-2790 (MG) SIPA
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1. James W. Giddens (the “Trustee”) as trustee for the liquidation of MF
Global Inc. (“MFGI”), respectfully submits this preliminary report on the progress of his
investigation and interim status report on the claims process and account transfers, in accordance
with his duties under sections 78fff-1(c) and (d) of the Securities Investor Protection Act
(“SIPA”), 15 U.S.C. §§ 78aaa et seq., and in accordance with the suggestion of the Court that the
Trustee prepare reports on a more frequent basis than a six-month formal reporting period (Hr’g
Tr., Nov. 22, 2011, ECF No. 423).
2. As the Court is aware, on October 31, 2011, the Honorable Paul A.
Engelmayer, United States District Court Judge for the Southern District of New York, entered
an Order (the “MFGI Liquidation Order”) commencing liquidation of MFGI pursuant to the
provisions of SIPA in the case captioned Securities Investor Protection Corp. v. MF Global Inc.,
Case No. 11-CIV-7750 (PAE).
3. The MFGI Liquidation Order, inter alia: (i) appointed James W. Giddens
as Trustee for the liquidation of the business of MFGI pursuant to SIPA section 78eee(b)(3);
(ii) appointed Hughes Hubbard & Reed LLP counsel to the Trustee pursuant to SIPA section
78eee(b)(3); and (iii) removed the case to this Court as required for SIPA cases by SIPA section
4. The Trustee’s investigation has preliminarily determined that MFGI had a
shortfall in commodities customer segregated funds beginning on Wednesday, October 26, 2011,
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and that the shortfall continued to grow in size until the bankruptcy filing on Monday, October
31, 2011.1
5. The Trustee’s investigators have now traced a majority of the cash
transactions, totaling more than $105 billion, made in and out of MFGI in the last week before
bankruptcy and are completing the process of tracing the remaining transactions. MF Global
also executed securities transactions totaling more than $100 billion during its final week of
operations. These included liquidation of customer securities, proprietary positions and other
items. The securities included complex instruments, such as off-balance sheet repurchase
transactions involving sovereign debt securities and derivative structures.
6. For three months the Trustee’s investigative team has worked to
understand what happened during the final days of MF Global when cash and related securities
movements were not always accurately and promptly recorded due to the chaotic situation and
the complexity of the transactions. With these preliminary investigative conclusions in hand, the
Trustee’s investigative team will analyze where the property wired out of bank accounts
established to hold segregated and secured property ultimately ended up. The Trustee will then
determine whether there is a sound and legal basis for recoveries against third parties that will
help make customers whole. These will be very complex legal and factual determinations, which
the Trustee will make consistent with his duty as the advocate for the former customers of
1 This preliminary report on the progress of the Trustee’s investigation is supplemented by slides that are annexed
as Appendix A.
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7. The investigation to date has found that transactions regularly moved
between accounts and that funds believed to be in excess of segregation requirements in the
commodities segregated accounts were used to fund other daily activities of MF Global. In the
past, such transfers were in amounts of less than $50 million, but as liquidity demands increased
and could not be met from internal sources, much larger amounts were used, apparently with the
assumption that funds would be restored by the end of the day. By Wednesday, October 26th, as
the result of increasing demands for funds or collateral throughout MF Global, funds did not
return as anticipated. As these withdrawals occurred, a lack of intraday accounting visibility
existed, caused in part by the volume of transactions being executed, and the 4(d) U.S.
segregated commodity customer account appears to have reached a deficit condition on
Wednesday, October 26th that continued through to MF Global’s bankruptcy.
8. The Trustee has identified most of the parties that were the immediate
recipients of transfers from MFGI during the final days and weeks of operation. These transfers
were largely effected through the clearing banks acting on behalf of MFGI. The ultimate
recipients of these transfers included banks, exchanges and clearing houses, MFGI affiliates,
counterparties, and customers of the futures commission merchant and the broker-dealer.
9. The number of transactions executed by MF Global during the last week
prior to the initiation of insolvency proceedings escalated to unprecedented volumes. The rush
to meet funding needs for collateral, margin and customer liquidations led to billions of dollars in
securities sales, draws on credit facilities, and a web of inter-company loans across affiliates,
some foreign. The company’s computer systems and employees had difficulty keeping up with
the unprecedented volume of transactions. A number of transactions were recorded erroneously
or not at all. So called “fail” transactions—where either the buyer or seller fails to deliver the
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cash or the security, respectively—were five times the normal volume during the firm’s final
10. The investigation has revealed that a confluence of factors contributed to
the deterioration of MF Global’s liquidity position. The exposure to European sovereign debt,
coupled with the announcement of disappointing quarterly results, triggered credit downgrades
by Moody’s, Fitch and S&P. This escalation in credit risk mandated substantial margin calls and
increased demands from counterparties and exchanges for collateral. As an example, the
additional margin paid to support only the sovereign debt positions exceeded $200 million
during the final week of operations. This was a significant drain on available cash and securities.
The sovereign debt investments undertaken on a repo to maturity basis allowed some immediate
gains to be booked, but these were purely paper profits generating negligible cash while the
underlying transactions resulted in calls for substantial additional margin.
11. The heightened risk and apparent loss of confidence drove customers to
close their accounts and withdraw funds, resulting in even greater demands on a relatively
limited amount of available cash. The Trustee’s investigation has revealed that, while personnel
may not have been immediately aware of it, MFGI experienced a shortfall in 4(d) customer funds
beginning during the day on Wednesday, October 26th. MF Global Holdings Ltd., the MF
Global parent company, struggled to continue to operate and even to sell the business, but MFGI
appears to have remained in a shortfall of commodity customer segregated funds virtually
continuously until its parent filed for Chapter XI protection on Monday, October 31st and the
SIPA proceeding was commenced against MFGI later that afternoon.
12. The Trustee’s investigators, including the legal and forensic accounting
teams, have conducted over 50 witness interviews, preserved secure access to thousands of boxes
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of hard copy documents, imaged over 800 computer drives, and are maintaining over 100
terabytes of data.
13. To understand where the funds went during October 2011, the analysis
conducted by the Trustee’s professionals has included 840 cash transactions in excess of $10
million that total $327 billion, and an ongoing analysis of related securities transactions
involving a value of over $100 billion. These large cash transactions alone span 47 bank
accounts across eight financial institutions. An additional 20,000 cash transfers that total $9
billion involve transfers of less than $10 million.
14. The Trustee’s investigation is continuing to correlate cash transfers to
relevant movements of securities used as collateral or loaned to counterparties. To that end, the
Trustee is now working with various third parties to further define these securities transactions
and obtain more complete information about the extent and basis for transfers to select parties.
The Trustee continues to investigate the complex factual and legal questions to determine how
best to pursue possible recoveries and the extent to which applicable law would support claims
against particular recipients of funds, affiliates, and possibly to other parties, including
employees of MF Global.
15. The Trustee’s investigation will continue, in coordination with the
regulatory and law enforcement investigations that are being conducted by the Department of
Justice, the Commodity Futures Trading Commission, and the Securities Exchange Commission
on an ongoing basis. The Trustee will seek to release additional information related to his
investigation in the future, but cannot prematurely release information that might compromise
the integrity of those investigations or the Trustee’s own efforts to recover funds for customers
and the estate.
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16. The Trustee’s staff is continuing its analysis of customer claims after the
claims filing period for commodities customers closed on January 31, 2012.
17. Once a claim is reviewed by the Trustee’s staff on as expedited a basis as
possible, a determination letter will be issued to the claimant. These determination letters are
being issued on a rolling basis. The determination letter will acknowledge the claim and provide
a determination as to whether the claim has been allowed, denied, reclassified, or is subject to
further reconciliation or information requests.
18. The Trustee is eager to make additional distributions to former MFGI
customers as soon as possible. However, the Trustee is required by law to hold an appropriate
reserve of funds until disputed claims are resolved either through negotiation or by the Court. At
this time, the Trustee anticipates significant disputed claims against the MFGI estate by MF
Global Holdings Ltd., MF Global UK Limited, and other entities. The Trustee will move to
attempt to resolve these claims as quickly as possible, but it is uncertain how long resolution will
take. Therefore, it is not known at this time when the Trustee will be legally able to make
additional distributions.
19. The Trustee has already distributed nearly $4 billion to former MFGI
retail commodities customers with U.S. futures positions via three bulk transfers:
 Within days of the bankruptcy, the Trustee received Court approval for
the transfer of 10,000 commodities customer accounts with three
million open positions, along with approximately $1.5 billion in
collateral associated with those positions at the time of the bankruptcy.
These open positions had a notional value of $100 billion. It is
estimated that 40% of all commodity futures exchange activity in U.S.
markets came from MFGI trades and a serious disruption in markets
was avoided by the transfer.
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 A transfer of 60% of the cash attributable to approximately 15,000
customer commodity accounts with cash only in the accounts, totaling
approximately $500 million, was completed in November.
 In December and January a third transfer occurred that moved
approximately $2 billion to restore 72% of U.S. segregated customer
property to all former MFGI retail commodities customers with U.S.
futures positions.
20. In addition, the Trustee has received Court approval to sell and transfer
approximately 318 active retail securities accounts, which is substantially all of the securities
accounts at MFGI. Nearly all securities customers have received 60% or more of their account
value and already 194 of former MFGI securities customers have received the entirety of their
account balances because of a Securities Investor Protection Corporation guarantee.
Dated: New York, New York
February 6, 2012
Respectfully submitted,
By: /s/ James B. Kobak, Jr.
A member of the firm
One Battery Park Plaza
New York, New York 10004
Telephone: (212) 837-6000
Facsimile: (212) 422-4726
Attorneys for James W. Giddens,
Trustee for the SIPA Liquidation of
MF Global Inc.
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Appendix A
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Consolidated Overview of Cash Movement
MF Global Inc. 10/1 – 10/31
MFGI operated 47 bank accounts held at 8
financial institutions.
There are 840 transactions > $10 million
that total approximately $327 billion.
This flowchart excludes roughly 20,000
transactions < $10 million that total approximately $9 billion. “Third party” includes customers, lending banks, brokerage firms, exchanges, and clearing agents. For presentation purposes, this chart does not reflect certain transactions that occurred solely within a related grouping of accounts. This reflects cash movement only. Investigation is ongoing to trace correlated securities, collateral and other assets. Third Party Broker-Dealer House Commodities House Affiliates Commodities Customer (Sec 30.7) Broker-Dealer Customer (15c3-3) Commodities Customer (Seg 4d) 1 11-02790-mg Doc 896 Filed 02/06/12 Entered 02/06/12 13:47:09 Main Document Pg 10 of 13 ► Credit rating downgrade ► Increased margin calls ► Funds in segregation: excess turns into deficit ► Customer liquidations / withdrawals ► Bonds borrowed program unwind creates liquidity gap of approx $450 - 500 million ► Increased draws on both credit facilities: ► Unsecured Revolving Credit Facility nearly fully drawn on 10/28 at $1.17 billion of the $1.2 billion ► Secured facility balance of at least $130 million of the $300 million. Pertinent Liquidity Events 10/24 – 10/31 2 11-02790-mg Doc 896 Filed 02/06/12 Entered 02/06/12 13:47:09 Main Document Pg 11 of 13 Increased margin calls 0.00 0.20 0.40 0.60 0.80 1.00 1.20 $ billions 10/24 10/25 10/26 10/27 10/28 10/31 Sovereign Debt Repo To Maturity - Margin Call Trend Initial Margin Variation Margin Buffer Margin Increase Coverage Collateral Posted Date Initial Margin Variation Margin Buffer Margin Increase Coverage Total Margin Collateral Posted Margin Call 10/24 278,049,205 182,979,874 5,000,000 466,029,079 457,962,898 8,066,181 10/25 277,302,875 188,277,470 5,000,000 470,580,345 464,694,118 5,886,227 10/26 410,963,534 185,592,415 5,000,000 601,555,949 492,732,015 108,823,934 10/27 454,624,390 182,811,558 5,000,000 23,280,469 665,716,417 604,003,047 61,713,370 10/28 495,975,763 199,344,353 5,000,000 23,219,740 723,539,856 663,925,523 59,614,333 10/31 745,975,763 199,344,353 5,000,000 23,219,740 973,539,856 663,925,523 309,614,333 3 11-02790-mg Doc 896 Filed 02/06/12 Entered 02/06/12 13:47:09 Main Document Pg 12 of 13 Customer funds in segregation: excess turns into deficit 4.00 4.50 5.00 5.50 6.00 6.50 7.00 7.50 Oct 24 Oct 25 Oct 26 Oct 26 (A) Oct 27 Oct 28 $ billions Daily Segregation Requirements and Funds in Segregation Amount required to be segregated Total amount in segregation Excess Deficit (A) A shortfall in segregated customer funds occurred during 10/26. The calculation originally prepared by MFGI contained an error. Cash deposits in segregated funds bank accounts were erroneously overstated. 4 11-02790-mg Doc 896 Filed 02/06/12 Entered 02/06/12 13:47:09 Main Document Pg 13 of 13

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