Some interesting news out of the PFG bankruptcy case, with the court approving a settlement offer of 30 cents on the dollar from the trustee to a single forex customer, which in turn opens the offer up for any and all FX customers. The legalese:

“Accordingly, based on the reasons set forth in the Motion2, the Court authorized Ira Bodenstein, the chapter 7 trustee (“Trustee”) for the bankruptcy estate of Peregrine Financial Group, Inc. (“PFG”), to settle the Forex and OTC Metals Claims pursuant to certain terms and conditions (the “Settlement”).

The terms of the Settlement are that any Forex or OTC Metals Claimant (collectively, “Forex Claimant”) may choose to receive a onetime payment equal to thirty percent (30%) of their Allowed Forex and/or OTC Metals Claim3 (the “Settlement Payment”) on account of such Forex and/or OTC Metals Account (collectively, the “Forex Account”), in full and complete satisfaction of such Claim, specifically including the waiver of any further claim respecting such Forex Account against the bankruptcy estate of PFG.”

If you’ve gotten some calls and emails this morning from the ‘claim buyers’ offering 10% on Forex claims (up from 0%), that’s because they know they can flip it for 30%. Don’t fall for it.

Digging a little deeper here – this settlement offer is interesting because the letter of the law pretty clearly states that FX customers are not commodity customers as that term is defined under the Commodity Act (i.e. – not afforded the same protections in the case of an FCM bankruptcy), and the judge did grant summary motion to the trustee dismissing the claim against the estate which would have treated them as customers.

But, the settlement is a bit of a nod to the fact that they were treated like customers and they did believe they were customers, which further muddies the water on how these customers should be treated under the law. CFTC – where are you on this?  I’m sure the 10s of thousands of forex customers throughout the industry would appreciate some clarity on just what is exactly supposed to happen to their funds in the case of their broker going bankrupt.

As for futures customers – we see this moving down our estimate of a 55% recovery before any class action suit recoveries, a bit to about 53%. And of course, we continue to root on the CFTC in their lawsuit with US Bank.