Sentinel Management Files for Chapter 11 Bankruptcy

[Pa(b)st Prime]

I can only go by this:

Velocity Futures LP, another futures broker that invested $18 million with Sentinel, filed a legal motion to intervene in the Farr suit. Sentinel manages its clients' money in large pools, rather than separate accounts, so any money that's returned to one customer leaves less for all the others, Velocity said.
"Because Velocity has limited assets, any transaction that Sentinel enters into in order to generate funds to pay Farr will have a direct impact on Velocity," the company said in its motion. "The disposition of Farr's claim may, as a practical matter, impair or impede Velocity's ability to protect its interests."

http://www.marketwatch.com/news/sto...x?guid={86FD98C0-CBA1-48C4-B1A0-E144E76BAC0E}

So that's 18 of their 19. Not to mention, how much have Velocity customers lost in the recent volatility?

Quote from osorico:

According to the 6/30/07 FCM Financial Data available here, Velocity had (on 6/30/07) 19M+ segregated customer funds.

If those numbers have remained similar since that time, Sentinel held about 50% of that.

Velocity certainly is not what I would consider flush with cash, but I think Pabst is overboard writing an epitaph for Velocity and Velocity customers.


Relax... watch the path of Dean... Houston is not a certain target.
Osorico

EDIT: I do agree there is a fly in the ointment. Im reminded of an old WS adage I was discussing just yesterday... If you think the bottom is in, it probably isn't. If you know the bottom is in, you're late.

 

[osorico]

Quote from Pa(b)st Prime:

I can only go by this:

Velocity Futures LP, another futures broker that invested $18 million with Sentinel, filed a legal motion to intervene in the Farr suit. Sentinel manages its clients' money in large pools, rather than separate accounts, so any money that's returned to one customer leaves less for all the others, Velocity said.
"Because Velocity has limited assets, any transaction that Sentinel enters into in order to generate funds to pay Farr will have a direct impact on Velocity," the company said in its motion. "The disposition of Farr's claim may, as a practical matter, impair or impede Velocity's ability to protect its interests."

http://www.marketwatch.com/news/sto...x?guid={86FD98C0-CBA1-48C4-B1A0-E144E76BAC0E}

So that's 18 of their 19. Not to mention, how much have Velocity customers lost in the recent volatility?

OK. I based my post off the first linked article in this thread. Armed with the info in the link YOU supplied, as a prudent man, reasonable doubt is no longer a reason to delay taking action.

FWIW; I have multiple accounts. And part of my diversification involves different FCMs. I do not have account(s) at Velocity, Farr or Penson. FTR: mine are held at RCG, Rand, PFG, and Vision. Over the last 2 years I've had a few discussions here on ET about this diversification. Mostly I was determined to be overly cautious; lookin like a genius now. Monday RJO gets added to my list funded with partials from the others.

Osorico

 

[fseitun]

I got some serious cash deposited with Velocity Futures.

I am about to freak the hell out now...all I've been concerned is making money and trading well for chrissake...

I never would have thought to spend the weekend worrying about my funds, which by the way I thought of as SEGREGATED and UNTOUCHABLE.

I am logging into my account now and withdraw everything. I am sick to my stomach to even read this c.ap...

By the way, I am probably one of the few VF customers who made good money during this market downfall.

 

[TheStudent]

Quote from rcanfiel:

I think segregation of funds is more thorough than the financial solvency of one FCM. In the event of such failure, usually customer funds are also protected by larger networks.

It's been a while since I looked at it, but I think basically there are two layers of protection for FCM customers.

Your funds are segregated so if the firm goes down you are okay.

The firm pays an insurance premium to an industry body that pools a fund which is to be used to make whole customer accounts that have been impaired.

 

[fseitun]

By the way, for all those that this case may be another Refco in the making...

I'd like to remind you that only clients of Refco FX lost part of their funds.

 

[fseitun]

This is what I found on the Velocity Futures website.

Financial Stability

Velocity Futures, L.P. is a registered United States Futures Commission Merchant ("FCM") with the Commodity Futures Trading Commission ("CFTC") and is also a member of the National Futures Association ("NFA"). Velocity Futures is also a member of the Intercontinental Exchange ("ICE")as a participant and is pending Eurex ("Eurex") and EUREXUS ("EurexUS")as an NCM. Velocity Futures, L.P. is operated by it's general partner Velocity Management I, L.L.C.

Due to the strict daily financial reporting requirements, substantial net capital requirements to hold customer funds on deposit, and the vigorous audits performed by the NFA, your funds on deposit with a United States FCM are well protected.

 

[amiindew]

As I understand it from various news sources, Velocity stands to lose 15% of USD 18 million, leaving Velocity with USD 15.3 million while Velocity requires approx. a net capital of USD 3.125 million according to their June Financial report. So why would they be in jeopardy? Can someone explain pls. Thanks

 

[fseitun]

Quote from amiindew:

As I understand it from various news sources, Velocity stands to lose 15% of USD 18 million, leaving Velocity with USD 15.3 million while Velocity requires approx. a net capital of USD 3.125 million according to their June Financial report. So why would they be in jeopardy? Can someone explain pls. Thanks

How do you know Velocity is only risking 15% of USD 18 million?

Can you report the sources please?

 

[mokwit]

Sounds a bit like the Refco situation where for a percent or two more you basically signed away the ownership so what you thought was your asset became Refco's asset. Remember how Refco's laywer contended that the clients assets were in fact refco's assets because of this distinction (Jim Rogers probably still does). Looks to me like this is what has happened - i.e. they used a cash management company that invested your money, paid you a spread over treasuriesand kept the rest for itself. Probably bought mortgage bonds.

With a FCM, if a big customer goes under YOUR assets not his assets or the brokers assets or the broker owners assets are used to cover the loss. The supposed protection is purely cosmetic.

I am not an expert - I know about this from having had funds with Refco FCM side. If anyone knows different or better by all means correct what I have written.

Good Luck to all. I sympathise.

 

[fseitun]

Quote from mokwit:


I am not an expert - I know about this from having had funds with Refco FCM side. If anyone knows different or better by all means correct what I have written.

Good Luck to all. I sympathise.

Did you lose all of your funds in the Refco crack?