KPMG: $1bn of MF Global client money locked in banks

KPMG ADMINISTRATORS have said that around $1bn (£629m) of MF Global's clients' money is locked away in other financial businesses, five months after the investment company collapsed.

Richard Fleming, Richard Heis and Mike Pink, partners at KPMG, were appointed joint special administrators of MF Global UK in November.

The administrators have collected more than $500m for clients so far. However, the funds in client segregated accounts were mixed with other funds from other accounts, which is why the administrators have been delayed in returning funds and it is proving difficult for them to recover, Bloomberg reports.

KPMG administrators have threatened to sue a "small number of financial institutions", if they don't hand over the $1bn. However, they would not identify which companies were holding the funds.

In a US congress meeting this week investment bank JP Morgan Chase, one of the largest creditors at MF Global, revealed the events that led to the collapse of the bank.

Demands by JP Morgan Chase to replenish an overdrawn account led MF Global to transfer cash from a customer account to one of its own, said deputy general counsel at JP Morgan's investment bank Diane Genover, the Financial Times reports.

MF Global CEO Jon Corzine (pictured) testified at the congressional hearing that he was not aware of whether clients' money was inappropriately used.

The newly created special administration entails three tasks: making a swift return of client assets; timely engagement with authorities; and to rescue the business as a going concern, or to wind it up in the best interests of the creditors. A regular administration involves the latter, but not the first two objectives.