NOTICE OF PROPOSED SUPPLEMENTAL PROCEDURES FOR REMAINING CUSTOMER DISTRIBUTIONS
On November 8, 2021, the Trustee filed the Trustee’s Motion for Entry of an Order Approving Supplemental Procedures for Remaining Customer Distributions (the “Motion”). As of the filing of the Motion, the Court has authorized the Trustee to make 72.16% distributions to holders of allowed 4d customer claims and 100% distributions to holders of allowed 30.7 customer claims. The Trustee has already distributed more than $290 million to over 8,000 holders of futures customer claims.
The majority of the customers have received all of their distributions on their allowed customer claims. However, 1,476 customers, owed approximately $3.7 million, have not received one or more of their distributions (the “Partial Distribution Customers”). These customers have not received all or part of their distributions because the distribution checks that the Trustee issued to those customers were returned as undeliverable to the addresses set forth in their proofs of claim or expired without being cashed.
In the Motion, the Trustee requests that the Bankruptcy Court establish procedures for the Proposed Distribution Customers to complete and return the documents necessary to facilitate the distribution of their property and – as a last resort – disallow the claims of customers who either fail to comply within the sixty-day period in the proposed order, or fail to cash a distribution check within the check’s ninety-day expiration period.
The Motion is scheduled for hearing on December 2, 2021, at 10:00 a.m. (CST) using Zoom for Government, before the Honorable Judge Carol A. Doyle, Bankruptcy Judge, or such other Judge who may be sitting in her place and stead. To appear by video, go to Zoom for Government at this link, then enter the meeting ID and password. To appear by telephone, call Zoom for Government at 1-669-254-5252 or 1-646-828-7666, then enter the meeting ID and password. The meeting ID for this hearing is 161 155 8289 and the password is Doyle742. The hearing may be continued from time to time without further notice other than by announcement in open court. A copy of the Motion and the proposed order is available here.
NOTICE OF ADDITIONAL DISTRIBUTIONS TO HOLDERS OF ALLOWED 4D CLAIMS
On March 18, 2020, the Bankruptcy Court for the Northern District of Illinois entered an order (“Distribution Order”) authorizing the Trustee to make additional distributions to holders of Allowed 4d Customer Claims in an amount up to 72.16% of their Allowed 4d Customer Claims. With respect to holders of Allowed 4d Claims that received all prior distributions, the incremental distributions will be 9.16% of each holder’s Allowed 4d Customer Claim. The Bankruptcy Court previously approved a 100% distribution to the holders of Allowed 30.7 Customer Claims. The Trustee anticipates that the distribution checks will be mailed starting on May 15, 2020. A copy of the Distribution Order is available here.
Please contact Omni Agent Solutions if you are the holder of an Allowed 4d Customer Claim or an Allowed 30.7 Customer Claim (collectively, “Allowed Futures Claims”) and have not received all prior distributions made by the Trustee. No distributions will be made to holders of Allowed Futures Claims that either (i) did not cash a prior distribution check or (ii) the check was returned to the Trustee as undeliverable. If you have not received all of your prior distributions, you are urged to check the Claims Register to confirm that you have an Allowed Futures Claim and that Omni Agent Solutions has your current mailing address. The Claims Register is available here. You may update your mailing address by contacting Omni Agent Solutions here.
NOTICE TO PFG FUTURES CUSTOMERS OF PROPOSED DISTRIBUTION
On February 21, 2020, the Trustee filed the Trustee’s Motion for Entry of an Order Authorizing Additional Interim Distributions on Allowed 4d Customer Claims (the “Motion”). In the Motion, the Trustee requests authority from the Bankruptcy Court to make up to a 72.16% interim distribution from segregated and non-segregated cash to the holders of Allowed 4d Customer Claims (the “Proposed Distribution”).
With respect to holders of Allowed 4d Customer Claims that received all prior distributions, the proposed incremental distribution will be 9.16%. Holders of Allowed Futures Claims that did not receive the full amount of their prior distributions will receive their pro rata share of the undistributed portion of all prior distributions.
The Trustee also requested authority from the Bankruptcy Court to set 11:59 p.m. (CST) on February 20, 2020 as the “Record Date” for the Proposed Distribution. As of the Record Date, the claims register shall be closed for the purposes of the Proposed Distribution and the Trustee shall have no obligation to recognize any transfer of any claims occurring after the Record Date. The Proposed Distribution checks will be mailed to the customer at the address contained in the proof of claim as of the Record Date.
The Motion is scheduled for hearing on March 18, 2020 at 10:00 a.m. (CST) in Courtroom No. 742, United States Courthouse, 219 South Dearborn Street, Chicago, Illinois, before the Honorable Judge Carol A. Doyle, Bankruptcy Judge, or such other Judge who may be sitting in her place and stead. The hearing may be continued from time to time without further notice other than by announcement in open court. A copy of the Motion and the proposed order is available here.
DISTRICT COURT FOREX JUDGMENTS UPHELD ON APPEAL
On August 7, 2017, the United States Court of Appeals for the Seventh Circuit affirmed rulings by the United States District Court and the United States Bankruptcy Court in favor of Ira Bodenstein, chapter 7 trustee of the Peregrine Financial Group, Inc. (“PFG”) bankruptcy estate, relating to the treatment of claims by customers who held accounts with PFG for retail foreign exchange (“Forex”) and over-the-counter spot metals (“Metals”) trading.
In Secure Leverage Group Inc., et al. v. Bodenstein, a group of former Forex and Metals customers sought the return of funds held by PFG at the time of its bankruptcy on the grounds that Forex and Metals contracts were “commodity contracts” within the meaning of the Bankruptcy Code. Therefore, the plaintiffs argued, their claims were entitled to the same priority afforded to futures customers. The Secure Leverage claimants also asserted that PFG held the funds they deposited for Forex and Metals trading in trust, such that those funds are not part of the bankruptcy estate. Judge Carol A. Doyle of the Bankruptcy Court rejected both theories and, on appeal, U.S. District Judge John J. Tharp Jr. agreed, endorsing the Bankruptcy Court’s rationale and affirming its judgment in favor of the Trustee.
In Miller, et al. v. Bodenstein, a second group of Forex and Metals claimants, represented by the same attorneys as the Secure Leverage plaintiffs, filed a class action lawsuit on behalf of all of PFG’s former Forex and Metals customers, in which they asserted new legal theories in support of their claims for the return of funds deposited for Forex and Metals trading. Because the Miller class action lawsuit was filed more than two years after the claims bar date, the Bankruptcy Court dismissed the lawsuit as untimely. Again, Judge Tharp agreed and affirmed the Bankruptcy Court's entry of judgment in favor of the Trustee.
On further appeal, the Court of Appeals found Judge Tharp's decision to be a "thorough and well-reasoned opinion" that "properly resolved all of [the Forex and Metals claimants'] challenges." As such, the Court of Appeals adopted the District Court's opinion as its own, and entered final judgment affirming the District Court.