Man's PAAM dealings back in CFTC sights

Oh, and is that a settlement offer I spy?

Investors in Paul Eustace’s failed—to the tune of $180 million or so—Philadelphia Alternative Asset Management have long decried the Commodity Futures Trading Commission’s apparent reluctance to discipline broker Man Financial Inc for prima facie, at the very least, failure to supervise certain of its employees, and other potential regulatory violations.

The investors may have gotten a little ahead of themselves. If somewhat understandably; CFTC attorneys more than a year ago told Judge Michael Baylson in Philadelphia’s federal court that it did not plan acting against Man Financial or its employees, for their alleged contributions to the collapse. Which brings us to Page 142 of the most recent F/1A filing by MF Global Ltd, the entity that will assume Man Financial operations after its IPO spin-off from the UK-based parent Man Group plc:

. . .The Commodity Futures Trading Commission has been conducting an investigation of us relating to the PAA[M] matter, and we believe that the Commodity Futures Trading Commission may seek to cite and fine us.

“We believe that the CFTC may seek to cite and fine us.” Not, as the filing says in reference to another potential CFTC enforcement action, involving alleged conduct with more than passing similarity to certain of that alleged in the PAAM case, “We and the individuals strongly dispute the contentions of the [CFTC] staff...”

Elsewhere, the filing also said:

...Man Group has agreed to indemnify us for all costs, expenses and liabilities we may incur as a result of the PAAF litigation...for amounts in excess of $50 million, after giving effect to any insurance proceeds we receive...

Followed closely by palaver about the indemnity not being “a source of funds for...[on and on and on]...the plaintiff in the PAAF litigation.” But it would say that, wouldn’t it?

NakedShorts did not seek comment from either the CFTC or Man Financial; the former customarily declines to confirm or deny whether an investigation is under way (even when the investigation is disclosed by the prospective defendant), while the latter is gagged by the IPO filing.

Accredited Document Dumpster Divers, with a net worth of more than $1 million excluding the value of their primary residence, should form an orderly line on the other side.

MF Global Ltd
Amendment No. 2 to Form F-1
Jun. 21 2007

See sections (not linkable directly):
Philadelphia Alternative Asset Fund: Page 142
Commodity Futures Trading Commission potential action: Page 143
PAA[M] Indemity: Page 182

NB: The disclosures also originally appeared in the original, May 31, MF Global F-1 filing, and the subsequent F-1/A, filed Jun 8. NakedShorts apologizes for the oversight. (The MF Global filings refer to ‘PAAF,’ as the litigation principally relates to the Philadelphia Alternative Asset Fund Ltd; however ‘PAAF Scam;’ on these pixels, it is, and will remain, the PAAM Scam.)