Louis Freeh, the trustee for bankrupt MF Global Holdings Ltd., said in court papers filed today that there is a “disconnect” on estimates of what is missing from customer accounts and the amounts to be paid. Customers of the failed brokerage also filed objections to the distributions in court papers.

MF Global Inc. is seeking a bankruptcy judge’s permission to distribute another $685 million to customers, which would bring them from 72 percent to about 80 percent of what they’re owed for funds missing from their segregated accounts. A trustee for the brokerage unit in a case under the Securities Investor Protection Act, James Giddens, has estimated there is a $1.6 billion shortfall in what they’re owed.

“There appears to be a growing disconnect between the SIPA trustee’s position on the amount of alleged ‘missing’ customer property and what the facts support,” lawyers for Freeh wrote in the filing in U.S. Bankruptcy Court in Manhattan.

Freeh cited an estimate from the CME Group Inc. that the missing funds total $500 million to $600 million. CME, the world’s largest futures exchange, had auditing authority over the failed brokerage.

Liquidation

MF Global Holdings filed the eighth-largest U.S. bankruptcy on Oct. 31 with debt of almost $40 billion after making $6.3 billion in bets on sovereign debt and getting margin calls. Its operating unit, MF Global Inc., was put into liquidation under SIPA. Giddens oversees that liquidation to repay customers, while Freeh oversees the wind-down of the parent company to repay creditors including JPMorgan Chase & Co.

“We stand by our gap number,” Kent Jarrell, a spokesman for Giddens, said in a statement.

The planned distribution is for “customers who suffered when MF Global failed” and the trustee will do all in his power to make the distribution despite the opposition, Jarrell said.

A group of six individuals and two funds calling themselves “Certain MF Global Inc. Claimants” objected to the distribution, saying there wasn’t enough information disclosed. The distribution would differ from past ones because it calls for customers to agree to certain conditions. What those conditions are, and whether the trustee might require a release from lawsuits, isn’t known, the group said.

Claim Releases

A group calling itself the “Commodities Customers” also objected, saying the conditions could force them to give up claims against third parties.

By requiring a release, Giddens would “coerce futures account customers of MFGI to assign to him their claims against third parties as a condition to receive disbursements of their own money,” lawyers for the group wrote.

Freeh said Giddens is in the best position to determine whether $1.6 billion or $500 million to $600 million is missing, and that he needs to explain whether the assets are actually missing, or whether some have been identified and are outside of his control. Freeh also said there’s been a lack of progress in distributing securities customers’ property, which is treated differently from that of commodity customers.

An updated report giving more information to customers and creditors is needed, Freeh said.