Federal 7th Circuit Court
Civil Court
Bankruptcy
In Bankruptcy proceeding filed by Trustee seeking to hold debtor’s partners liable for losses incurred by debtor when partners allowed segregated customer funds to be used to help cover debtor’s losses in certain trading transactions that were subject to margin call, Dist. Ct. erred in reversing initial Bankruptcy Ct. order that found partners’ failure to stop certain wire transfer that paid margin call from said segregated customer funds constituted violation of 17 CFR section 30.7, as well as violation of partners’ fiduciary duties to their customers. Record supported initial finding that partners knew about margin call and yet took no action to prevent wire transfer containing customers’ segregated funds. Moreover, record suggested that customer funds had been source for payment of $3 million margin call where debtor’s account was under-funded by $7 million on day of transfer.