2nd UPDATE: MF Funds Shortfall Could Be About 10% Of Assets -Lawyer

About 90% of customer assets held by failed broker-dealer MF Global Holdings Ltd. (MFGLQ) will be returned to the firm's former clients if the trustee is unable to recover any more funds, a lawyer involved in the bankruptcy said Wednesday.

The trustee unwinding MF Global's brokerage has dispersed about 72 cents for every dollar held by customers on deposit with the firm, but an estimated $1.6 billion remains out of reach, with some money missing and other funds held up by proceedings in other countries.

"If [the trustee] doesn't recover any more, the shortfall is probably going to be right in the range of the high 80s or perhaps the low 90s, in terms of recovery," said Vince Lazar, a partner with law firm Jenner & Block, which is representing futures exchange group CME Group Inc. (CME) in the bankruptcy proceedings.

MF Global collapsed Oct. 31, 2011, revealing the gap in client money that the firm was supposed to have safeguarded under U.S. commodity market law. Regulators and investigators have yet to provide a full explanation for the shortfall or where the money wound up.

James Giddens, the trustee unwinding MF Global's brokerage business, has recovered about $5.3 billion in futures customers' segregated funds held at the brokerage. Of this, about $400 million has been set aside for the claims of MF Global affiliates that cleared transactions through the firm, according to Lazar.

The remaining $3.8 billion has been returned to customers via a series of transfers arranged by CME in the several weeks following MF Global's demise.

Lazar said it was "hard to be precise" on the total level of the remaining gap because some of the funds that remain may be in dispute.

Two banks have endorsed Lazar's view on the recoverable assets in the MF Global matter. The U.S. unit of Barclays PLC (BCS, BARC.LN) has offered to pay domestic customers of the firm 90% of their original claims in exchange for the right to any additional funds that may be returned, people familiar with the matter have said. For foreign account holders, Barclays has been willing to pay 65% of claims.

Royal Bank of Scotland Group PLC (RBS, RBS.LN) separately indicated willingness to pay 91% of claims' value, but only for those held by institutional investor customers of MF Global, according to people familiar with the matter. RBS was willing to pay 66 cents on the dollar for foreign accounts.

-By Jacob Bunge, Dow Jones Newswires; 312 750 4117; [e-mail]

--Dan Strumpf contributed to this article.