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The trustee liquidating MF Global Inc. will receive $130 million from CME Group Inc. out of a total of $175 million the exchange is freeing up to pay back the bankrupt brokerage's customers and other creditors, Bloomberg News reported yesterday. Commodity customers who traded on U.S. exchanges will get $65 million, with the same amount going to customers who traded on foreign exchanges, while non-customer creditors will get $16.5 million, trustee James Giddens said yesterday. The money, belonging to MF Global and currently held or controlled by CME, will be returned under an agreement that requires a bankruptcy judge's approval, with CME paying out some of it directly, he said.

Bankruptcy Judge Harlin D. Hale yesterday refused to enforce Mexican glass maker Vitro SAB's controversial debt restructuring in a closely watched chapter 15 case that threatened to sever the cross-border business cooperation between the two nation's legal systems, the Wall Street Journal reported today. Judge Hale sided with bondholders in rejecting Vitro's bid, saying that Vitro's Mexican restructuring plan, which extinguishes guarantee claims of the U.S. bondholders, "manifestly contravenes the public policy of the United States and is also precluded from enforcement under...the Bankruptcy Code." Vitro thinks Judge Hale's ruling concerning the third-party releases of the guarantees involves a narrow issue of U.S. law and intends to appeal the ruling.

An ex-partner of Dewey & LeBoeuf LLP has accused the former leaders of the bankrupt law firm, once one of New York's largest, of running a "Ponzi scheme" that used money invested by new partners to enrich themselves and others, the Wall Street Journal reported today. In a lawsuit, former partner Henry Bunsow, a litigator who joined the firm's San Francisco office in 2011, alleges that former chairman Steven Davis and other leaders of the firm misrepresented Dewey's troubled finances to get him and other "successful partners" to join the firm, and then used the capital they invested—$1.8 million in Bunsow's case—to pay themselves and other partners. Dewey filed a bankruptcy petition May 28, after most of its roughly 300 partners had left and lenders balked at extending credit the firm needed to keep functioning. The firm owes more than $315 million to a wide-ranging group of creditors that includes banks, bondholders, landlords and vendors such as car services and staffing agencies.

Eastman Kodak Co. failed to persuade a judge to rule that Apple Inc. has no interest in a group of patents Kodak is putting up for sale as part of its bankruptcy reorganization, Bloomberg News reported yesterday. Bankruptcy Judge Allan Gropper said that the dispute could be resolved through a lawsuit in Kodak's chapter 11 case. "An adversary proceeding will permit the parties to raise issues in an orderly and expeditious fashion and preserve all of their just rights," Judge Gropper said. Kodak is planning to sell patent assets and said in court papers that it needed the order to aid in the sale. Apple has claimed ownership of the patents and is trying to "delay and derail" the sale effort, Kodak said.

Bankruptcy judges cannot rule or recommend rulings on fraudulent-transfer suits by the liquidator of Bernard L. Madoff's brokerage under the U.S. Constitution, defendants said in a brief to U.S. District Judge Jed S. Rakoff in New York, Bloomberg News reported yesterday. Suits that aim to "augment" a bankrupt firm's estate are based on common-law claims and by law require a ruling by a district judge, they said on Monday in the filing. Judge Rakoff ruled in May, in a case involving the Refco litigation trust, that bankruptcy judges do not have power to make final rulings on claims for fraudulent transfers and unjust enrichment. His law clerk sent the decision, which cited a U.S. Supreme Court's ruling in Stern v. Marshall, to lawyers for the Madoff trustee and defendants in related lawsuits, according to an e-mail obtained by Bloomberg. Bankruptcy judges can issue reports and recommendations to district judges, Rakoff said in the Refco opinion.

As Tribune Co. closes in on confirmation of its chapter 11 plan, attention has turned to the big-ticket litigation over the failed leveraged buyout that drove the media company to bankruptcy more than three years ago, Dow Jones Daily Bankruptcy Review reported yesterday. As the largest shareholder to cash out in the deal, raking in more than $1 billion, Chicago's McCormick Foundation "is obviously defendant number 1" in lawsuits seeking to claw back LBO winnings, David Zensky, attorney for major Tribune creditor Aurelius Capital Management, said on Friday at the opening of day two of confirmation hearings. Aurelius and other creditors who will be left with less than full payment under Tribune's plan are counting on a big payoff from the suits against McCormick, other shareholders, Tribune leaders and former leaders, and professionals who advised on the deal. A bankruptcy investigation turned up evidence the LBO was tainted with fraud, setting the stage for creditor lawsuits. Estimates in court papers claim the litigation could be worth hundreds of millions of dollars for Tribune creditors.

U.S. Trustee Tracy Hope Davis said in court papers filed yesterday that Residential Capital LLC needs to do more to ensure it is protecting consumer privacy for homeowners under bankruptcy law in the sales of its mortgage loan and servicing businesses, Reuters reported yeterday. Davis also challenged the potential break-up fee and other parts of an auction process for those businesses, saying that they would discourage bidders from participating. ResCap, the mortgage unit of Ally Financial, filed for bankruptcy in May with a plan to sell its mortgage servicing business for about $2.4 billion to Nationstar Mortgage Holdings, owned by Fortress Investment Group. It also plans to sell some mortgage loans to Ally for about $1.4 billion.

The official charged with rounding up funds for creditors of Scott Rothstein's law firm is suing a close friend of the disgraced former attorney, alleging a four-year history of back-and-forth transfers that helped Rothstein fund his lifestyle and Ponzi scheme, Dow Jones DBR Small Cap reported today. Herbert Stettin, the chapter 11 trustee for Rothstein Rosenfeldt Adler PA, on Thursday launched a lawsuit against Ronnie I. Picou and Southern Grouts & Mortars Inc., the Pompano Beach, Fla., company that has Picou at its helm and, according to Stettin, was tangled in the Florida resident's relationship with Rothstein.

U.S. District Judge Colleen McMahon on Thursday ruled that Akin Gump Strauss Hauer & Feld LLP, Jones Day and Dechert LLP are among 10 law firms that must account for profits they made from Coudert Brothers LLP's unfinished business, Bloomberg News reported on Friday. Coudert filed for chapter 11 protection in September 2006. The plan administrator sued the firms in 2008 in bankruptcy court claiming they were liable for any profits derived from completing client matters that former Coudert partners brought to their new homes. The firms argued that the doctrine did not apply as the matters were billed hourly and not taken on contingency. "Although the New York Court of Appeals has not addressed this precise issue, I believe that it would conclude that the method by which the client matters were billed does not alter the nature of Coudert's property interest in them," Judge McMahon said in her ruling.

Charles Ward fell behind on his mortgage in September and his lender seized his $2,958 federal tax refund and has taken $131 from each of his last four monthly Social Security checks, but Ward’s lender isn’t a bank, The Wall Street Journal reported yesterday. It is the U.S. Department of Agriculture's Rural Housing Service, which provides mortgage loans to rural homeowners and guarantees loans made by banks. It accounted for at least a third of all mortgages issued in 2010 in sparsely populated areas, according to data reported under the Home Mortgage Disclosure Act. The USDA doesn't need permission from a court to start collecting on unpaid debts. It can seize government benefits and tax refunds before a foreclosure is completed. After foreclosure, the USDA can go after unpaid balances, even in states that limit such actions by private lenders.