The trustee liquidating MF Global's broker-dealer said he may bring civil lawsuits against some of the company's employees in connection with a massive shortfall in customer funds created in the days leading up to its collapse.

Trustee James Giddens said in a statement on Thursday he may assert claims for breach of fiduciary duty and for violating rules governing the segregation of client funds. Giddens referenced "individuals at" MF Global's parent company and its broker-dealer, but did not name potential targets.

Giddens' spokesman, Kent Jarrell, said the individuals include officers, directors and other employees, but declined to say whether former Chief Executive Jon Corzine was among them.

Corzine left the company in November, days after MF Global went bankrupt amid investor fears about its exposure to risky European debt. According to a February report from Giddens, MF Global improperly used client funds to cover corporate transactions as the company sank, creating an estimated $1.6 billion shortfall in customer accounts.

Corzine's defense attorney did not immediately respond to a request for comment.

Corzine in December told a Congressional panel he did not intend to break laws and did not know what happened to customers' money.

Other key officers, including Chief Financial Officer Henri Steenkamp and General Counsel Laurie Ferber, told a Congressional panel last month they also did not know what caused the shortfall. Assistant Treasurer Edith O'Brien was scheduled to testify but invoked her Fifth Amendment right against self-incrimination.

O'Brien became central to regulators' ongoing investigation into the collapse after Congressional investigators released an email from her that said a $175 million transfer made last October 28, and which may have included customer funds, was "Per JC's direct instructions."

O'Brien's attorney, Evan Barr, declined to comment on Giddens' statement.

A spokesman for Gary Naftalis, Abelow's attorney, declined to comment. Lawyers for Steenkamp and Ferber did not immediately return calls seeking comment.

Giddens said in the statement he is "committed" to negotiating cooperative resolutions with the individuals where possible.

Jarrell said the trustee's legal team has already begun negotiations with some individuals and "is hoping to interview others."

CIVIL CLAIMS

Corzine and other current and former executives are already facing more than 20 civil class action lawsuits from customers over MF Global's demise.

Giddens is seeking to require customers to release certain claims against third parties and assign those claims to Giddens. The move would come as a precondition for customers to receive their share of a planned $685 million payout for which Giddens is seeking court approval.

At a hearing in U.S. Bankruptcy Court in Manhattan on Thursday, Judge Martin Glenn held off on approving the payout, voicing skepticism about the requirement to release and assign claims. Glenn said he was concerned the class actions pending against the MF Global executives would be dismissed if claims were reassigned.

Giddens' lead attorney, James Kobak, said at the hearing that the release applies only to claims related to money already repaid to customers, and would serve to streamline the recovery process.

Chris Larosa, an attorney for the Securities Investor Protection Corp, the insurance fund for customers of failed brokers, said customers should not be able to recover money for themselves which, if recovered instead by Giddens, would be shared among all customers.

But Glenn pressed Kobak on the legal authority for the release and assignment, which Kobak acknowledged does not explicitly exist for commodities claims as it does for securities claims.

"There's nothing that says you can do it, but nothing that says you can't," Kobak said.

Giddens is hoping to pay $600 million to customers who traded on U.S. exchanges, $50 million to those who traded on foreign exchanges, and $35 million to certain customers who hold physical property, like gold bars.

Commodities customers who traded on U.S. exchanges have already received about 72 percent, or $3.9 billion, of the value of their accounts through previous distributions by Giddens. The latest proposed payout would raise recovery to about 80 percent.

But "I'm only going to approve this if there's a legal basis," Glenn said.

CRITICISM FROM THE PARENT

Glenn was more decisive in brushing aside criticism of Giddens' payout plan from other parties, namely Louis Freeh, the trustee for MF Global's parent company.

Freeh had said the plan evidenced neglect of claims from MF Global affiliates in favor of those of public customers. He also demanded an explanation of how Giddens reached his $1.6 billion shortfall estimate when CME Group Inc has ballparked the gap at not being higher than $600 million.

Glenn said transparency was important, but said Giddens should not be expected to provide updates on his investigation prior to his next interim report, due June 4.

Freeh is responsible for recovering assets belonging to MF Global's parent company and its creditors, while Giddens is tasked with recovering funds for customers.

The bankruptcy is In re MF Global Holdings Ltd, U.S. Bankruptcy Court, Southern District of New York, No. 11-15059.

The brokerage liquidation is In re MF Global Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-2790.