Sentinel Management Files for Chapter 11 Bankruptcy

see:
Velocity, joining the suit today, sought to keep its own clients' assets from being sold to Citadel because the assets are being sold at a 15 percent discount. http://forum.channelnewsasia.com/vi....php?p=1262400&

lawyers for San Jose, California-based Farr and Chicago-based Velocity said Sentinel's sale should be blocked because the assets are being sold at a 15 percent discount.

Also Friday afternoon, a U.S. district judge blocked the sale of some of the $312 million in Sentinel assets to Citadel, granting a temporary restraining order that applied only to Farr Financial Inc. and Velocity Futures. Guzman's order remains in effect until Aug. 31. The order prevents Sentinel from transferring or selling any interests Farr or Velocity placed with Sentinel. "We think this transaction is closed," said Steven Roeder, a lawyer representing Citadel. In an interview afterward, Roeder said the Farr and Velocity assets account for a "very small" portion of the sale.
http://www.chicagotribune.com/busin...0,4532488.story

 

Panicking won't help!

You guy's are "making a run" on Velocity. Let it play out. The firm has 3mil of it's own if need be to bail ya all out. By asking for wires you're only making it worse.

 

I second that!

 

No, I did not lose anything, I was with the FCM side that was taken over by MAN. I'm sorry to say that this situation sounds more like the Refco Corporate side where people lost funds - although I think Jim Rogers got his back - he claimed he had asked for the funds to be put with FCM, but Refco had placed them with the non FCM side against his instructions.

 

I disagree with the don't start a run posts. Get your money out - look after yourself, no one else will.

Somebody will probably come in and say I/people who pull funds are unpatriotic - ask them if they will secure your funds with their house and Kids college funds if that is the case.

My observation is that people who have been around pull funds as its easier to put them back than reclaim them from a bankruotcy with some NY laywer 'contending' that your funds are now his clients funds for paying off creditors other than you.

I repeat, look after yourself, no one else will, Not George Bush, not FDIC etc

What happens if e.g a higher court overturns the ruling blocking sale to Citadel - I think Citadel is trying to get its own money back rather than make a vulture investment.

 

Customers' Pooled Segregated Accounts

Most major Clearing Brokers, are Futures Commodities Merchants ("FCMs) and operate under CFTC regulations, which require that customers' monies are segregated into a “Customers’ Pooled Segregated Account” (the “Pooled Account”). This is a separate account from the FCM's everyday operating account. Thus the FCM is not able to utilise customer’s monies for its own purposes. However, the segregated account, into which an individual customer’s money is paid, is not an individually segregated account - it is a pooled segregated account, into which monies belonging to many, if not all of the FCM's customers, are paid.

What many, often sophisticated and experienced investors (and even some CTAs), fail to appreciate is that, if the FCM was to suffer a major client loss, (relating to a client who was a participant in the Pooled Account), which resulted in a deficit, after applying the sum of all of the assets held for the defaulting client and all of the FCM’s liquid assets, then the Pooled Account could suffer net losses. In such a case those net losses would be passed on, on a pro-rated basis, to the remaining individual participants in the Pooled Account.

http://www.customhousegroup.com/cashman.htm


Of course, with Sentinel, it appears that Velocity, Farr and others were "parking" their Pooled Accounts with Sentinel so as to allow it to manage, and presumably provide an enhanced return on those monies. If Sentinel took that cash and made some bad investments, an individual account holder having a segregated account would have no protection from losses incurred by Sentinel.

Certainly, all is not lost. The assets Sentinel purchased still have substantial value. Citadel reported paid 85-90% of the face value of the assets it bought or was trying to buy from Sentinel. Whether these assets were the cream of the crop remains to be seen.

 

Thats what I was referring to.

 

Does this mean that we VF clients are "only" risking to lose 15-20% of our funds?

 

Does Velocity have any choice but to refuse to honor redemption requests? Their money appears to be frozen with Sentinel. You don't really think they are going to use their operating capital to honor redemptions do ya?

 

good point!