POST 2 OF 2 And no doubt about it, Apex Capital deserves to determine whether or not posts by others should be censored because they are âextremely LIBELOUSâ. You see, Apex Capital is a professional, as he informs us in his posting of 14 Oct 2005 10:58 am EST: One of the downsides, of being a professional, is that you are expected to waste time on silly niggling little formalities like due diligence. If you are a regulator, lawyer, accountant, or financial advisor, you are expected to make sure your clients, markets, and public arenât bilked in massive frauds like the spectacular collapse of the recent Refco IPO. If you are a CTA (Commodities Trading Advisor), you are expected to make sure that your clearing futures broker doesnât steal the funds of your clients, and doesnât lose them in a bankruptcy caused by trading losses of other customers, or caused by trading losses of embezzlers, thieves, and frauds disguised as customers. The wonderful thing about life on Mt. Olympus, with Apex Capital and Brandonf and other superior beings, is that it eliminates the need for such due diligence. If the deposits are insured by the exchanges, then why bother? If the broker does fail, and the exchanges refuse to make good on any losses suffered by your clients, then you can just throw a temper tantrum, and expect them to cave just as easily as Elite Trader does when Apex threatens a libel suit. So it is pretty obvious that Apex Capital did not and could not have performed due diligence in selecting a clearing futures broker for his clients, because if he had performed that due diligence, then he would have known that segregated customer funds are not guaranteed, by exchanges or by any other party, against broker bankruptcy or embezzlement. Letâs take another look at professional Apex Capitalâs professional credentials: What, me worry? Any reasonable person, reading these words, would read it to mean that Apex Capital clears other peopleâs money through Refco. Apexâs use of the word âbusinessâ adds to the impression that he uses Refco to clear other peopleâs money, not just his own. Apex, in stating that he uses Refco, âas I do with several other FCMsâ, implies that since he uses them all in the same way as he uses Refco, he runs client money thru Refco, just as he runs it thru his other FCMs. See, look, Apex Capital trusts Refco futures just as much as he trusts all the other FCMs, so you gaping primates and Chicken Littles and sissy-boys should just follow his example, instead of worrying and thinking and doubting, and polluting these boards with your primitive clicks and grunts. I realize I am only an amateur, so maybe it was wrong for me to share my thoughts. I did make a posting criticizing Apex Capital for breach of duty to his clients. This was based on my belief that he told us he clears other peopleâs money through Refco, while relying upon his delusion that futures accounts are guaranteed against broker bankruptcy and embezzlement. Apex responded with various demands and vague public accusations that I libelled him, but he failed to give any specific indication as to exactly which statements were untrue. Maybe it was part of his litigation strategy to be cagey about revealing exactly what it was that I did wrong. It appears he lacked the self-control required to pursue such a strategy, because in less than 24 hours, he finally broke down and got specific: Apex, however, did not accurately quote me. He omitted part of my sentence, in such a way as to alter my meaning. This particular sentence, from my original text, which Apex persuaded Baron to delete, read: Apex omitted the underlined portion. Apex also misspelled the word ârecklesslyâ. So then Apex demanded an apology. And he persuaded Baron to delete my discussion of Apex clearing other peopleâs money thru Refco. And then, he persuaded Baron to delete it from other postings of other ET members who quoted me. And then, incredibly, Apex re-posted my deleted text in full, as a quotation in a new posting of his very own, so that he could further attack me for it. I guess what Apex needs is not so much to censor libel, but rather, to achieve full control and domination over the forum; my allegedly libeous text was OK, provided he gets to control where and when and how to post it. And then, I guess he must have reconsidered, because now that posting, made by Apex Himself, has also been deleted from ET. I guess it just goes to show you that even Apex can make mistakes. After all, Heâs only a deity. Well, it looks like there was an innocent misunderstanding, as to whether or not Apex cleared other peopleâs money thru Refco. But do I owe Apex an apology? I mean, after all, I think the misunderstanding was his fault, because his own posting did give the impression that he did clear other peopleâs money thru Refco. Did I libel Apex? Iâm quite sure I didnât, because innocent misunderstandings are never libel. Libel only applies to maliciously false factual statements, but my statement was not maliciously false, regardless of who was to blame for the misunderstanding. So I think that Apex owes ME an apology, for falsely accusing ME of libel. Does anybody think that I should sue him? Or use the threat of suit to manipulate Baron into censorship? The coolest thing about Refco is that when they embezzle or defraud, and then get caught, then lickity-split, they just go out and rip off somebody else, so that they can return the loot to their previous victim. At least until now. I mean, they really do try. The CEO just got caught in a $400 million dollar fraud against Refco, so in a matter of hours, he flim-flammed an Austrian bank into loaning him that amount, collateralized by his soon-to-be worthless and de-listed and bankrupt Refco stock, so that he could pay back the loot to Refco. Talk about robbing Peter to pay Paul. This guy Bennett isnât just a fraud. Heâs got a 10th degree black-belt in fraud. You would think that since the CEO did return the loot, all would be forgiven, at least here in the U.S.A. Iâm sure every right-minded patriotic American admired the CEO for sticking it to a bunch of ignorant foreigners, who probably opposed the war in Iraq anyway. The prosecutors were, unfortunately, unpatriotic, unforgiving meanies, so they arrested the CEO, took $50 million in bail, and confined him to his penthouse wearing an ankle bracelet. I guess giving back the loot doesnât cleanse you of your criminality, after all. Anyway, its just like in the 1990s, when Refco embezzled from segregated customer funds in futures accounts, and used the money to pay Refcoâs debts. The scheme saved Refco from bankrupcy in the 1990s, and so, it was able to return the money to customer accounts, $123 million dollars, no harm, no foul. The company lived on, so that it could one day steal and steal again. The scheme worked so well, that they âborrowedâ segregated customer funds again. And again. And again. And again⦠The CFTC found that Refco did it on a routine, almost daily basis, and Refco consented to the findings and paid a million dollar fine, but neither admitted nor denied wrongdoing. If you are in finance, then crime pays. Extremely well. Million dollar fine? Cost of doing business. Zdreq quoted Lucky Luciano, visiting the NYSE floor, who commented âI joined the wrong mob.â Make no mistake about it, in legal terms, this was embezzlement. If Refco had gone under, it would have been unable to restore the embezzled customer funds, and so those customers would have been stuck, just like the Austrian Bank. Deliberate, unlawful, unauthorized, undisclosed "borrowing" from segregated customer accounts is EXACTLY the same thing as embezzlement. Embezzlement includes the unauthorized USE of money later returned. Embezzlement is a broader concept than that of taking and keeping. If we take Apex at his word, that he didnât clear other peopleâs money thru Refco, then it is still clear that Apex cleared other peopleâs money thru other clearing futures brokers. And it is still clear that he erroneously believed that the exchanges would guarantee client funds against bankruptcy of his other clearing brokers. So it is still clear that he failed to perform due diligence to protect his clients from the absence of any guarantee against bankruptcy of futures brokers other than Refco. He could not have performed due diligence to protect his clients against that threat, if he didnât know that the threat existed. Quite a professional.
A lot is made of the fact that Bennett repaid the $430MM debt-- "so what is the big deal?" Has it occurred to anyone that Bennett actually pledged his Refco common stock holdings to obtain that loan (from some bank in Austria)-- common stock securities & wealth that he would have NEVER gotten if the fraud was detected before the IPO. Therefore to me, the fact that he repaid the loan signifies and mitigates NOTHING as far as his degree of felony. If Bernie Ebbers can get essentially a life sentence for his shabby deals at Worldcom, then this Bennett should be nailed so hard that he can't even cry "uncle" when he's sleeping in his cell w/ boyfriends that he just can't refuse. I wouldn't mind seeing Goldman, BOA, Credit Suisse, Grant Thornton -- every single one of them tarred, feathered, fined, shamed, and punished. Where's that Spitzer guy? Where's the outrage? Not only should there be compensatory pusishment, there need to be severe punitive punishment to the tune of billions out of these deep pockets. I wouldn't mind seeing every single person inovlved in this IPO fired and expelled from the securities industry. For the first time in my life, I'm actually cheering the trial lawyers on in this one.
I will let you guys make up your own minds about this WSJ article. But wait...what the heck, I'm not gonna wait....here's the gist -- Basically, some of the accounts holders in _REFCO LLC_ -- the regulated futures arm (as a lot of us has been so patronizingly educated about the distinction) are having trouble getting their money since last week. http://online.wsj.com/article/SB112968449831872688.html?mod=home_whats_news_us
Btw, the Austrian bank is called Bawag, and the Austrian vice chancellor is calling for the nation's central bank to investigate the chummy relationship between it and Refco. It is my opinion that the financial world is underestimating the world-wide potential chain reaction from the refco fallout. I don't know what Bawag's capital strength is, but a $430MM non-performing loan (I would call a loan secured by worthless Refco shares and w/ the borrower now sitting in jail as non-performing) would put a dent in its financial strength. If I were a Bawag retail customer in Europe, I would follow the situation and Bawag's health very closely.
Guess what entity is listed as the first creditor in the Refco bankruptcy filing?... Austrian Bank's Link To Refco Is Scrutinized Vice Chancellor Calls For Probe, Likely to Focus On Loan to Mr. Bennett By EDWARD TAYLOR in Frankfurt and CARRICK MOLLENKAMP in London Staff Reporters of THE WALL STREET JOURNAL October 19, 2005; Page C3 When Refco Inc. Chief Executive Phillip R. Bennett needed a loan of about $430 million as his futures brokerage firm began to unravel, a little-known Austrian bank came to his rescue. Now, bank regulators are starting to ask why. Yesterday, the probe into the large U.S.-based firm expanded to Europe as Austrian Vice Chancellor Hubert Gorbach urged his country's central bank to open an investigation into Bawag P.S.K. and its relationship with Mr. Bennett. The Austrian Financial Markets Authority, which supervises Austria's banks and investment firms as well as the stock market, said, "We will take a close look at Bawag to see if all rules and regulations have been correctly followed," according to spokesman Klaus Grubelnik. Investigators are likely to examine the close relationship between Refco and the bank, known as Bawag, that extends at least as far back as 1998. It isn't clear why Mr. Bennett turned to the Vienna bank, out of all banks in the world, for help. At a bail hearing for Mr. Bennett last week, his lawyer said Mr. Bennett had planned a social trip for last week to Vienna with colleagues from Bawag. Wine tasting was on the agenda. The loan came to light on Oct. 10 when Refco first disclosed that an entity controlled by Mr. Bennett had owed Refco $430 million (Refco said he repaid it.) Bawag is listed as the first creditor in the Refco bankruptcy filing with an approximate claim of $451.2 million. According to the charge against Mr. Bennett, â¬350 million was transferred to an account held at Refco in the name of Phillip Bennett and an entity he controlled on or about Oct. 10 from a foreign bank and was converted to $424 million the same day. The charge doesn't name Bawag, but a person familiar with the matter has identified it. A Bawag spokesman says the bank gave a loan of â¬75 million to Refco and another loan of â¬350 million to companies controlled by Mr. Bennett. The loans were secured with Refco stock, which at the time had a high valuation, added Thomas Heimhofer, the spokesman. "This was a good basis for giving a loan, we thought at the time." Geography aside, Bawag is an unusual choice. The Vienna bank is best known as a retail operator that provides individuals with basic banking like mortgages and credit cards. It has 157 branches and operates in more than 1,000 postal outlets in Austria and is principally owned by a trade union that serves as an umbrella organization for unions in the public and private sector, varying from timber to rail to arts and the media. All are a far cry from the futures broking business that Refco has come to dominate. "There were no signs to suggest to us that Refco was a questionable partner. The IPO was successful, which to us suggested that it was a successful business," Mr. Heimhofer said. He said the bank isn't formally under investigation. In 1998, Refco and Bawag began their relationship when Bawag Chief Executive Helmut Elsner and Tom Dittmer, one of Refco's first leaders, discussed a partnership, Mr. Heimhofer said. This resulted in Bawag taking a 10% stake in Refco, which it sold back to Refco last year, he added. Leveraged-buyout firm Thomas H. Lee Partners wound up owning the stake. In May 1999, Refco cited Bawag's investment in it as a proxy for the company when futures regulators cited Refco over rules-compliance issues. At the time, Refco's president, Joe Murphy, called Bawag's investment a "vote of confidence" demonstrated by Bawag. This week, Mr. Heimhofer said Bawag wasn't in jeopardy. -- Ianthe Jeanne Dugan and Kara Scannell in New York contributed to this article.
Quote from synchro: This is the particular WSJ Refco article we need to see, re: futures traders who can't get their money out of Refco, L.L.C. (futures broker).
You're welcome. Some Refco Customers Say They Can't Get Access to Their Funds By KAREN RICHARDSON, DIYA GULLAPALLI and PETER A. MCKAY Staff Reporters of THE WALL STREET JOURNAL October 19, 2005; Page D1 The Refco Inc. bankruptcy filing has sent jitters through the world of commodities and futures trading. But the firm also has thousands of accounts held by individual investors, some of whom are struggling to recover their funds. The commodities brokerage firm excluded its regulated subsidiaries from its Chapter 11 filing. One of these, Refco LLC, the company's main futures trading unit, has about 200,000 customer accounts. Some of these are smaller investors who used Refco to trade futures contracts based on commodities, bonds and currencies. A futures contract conveys the right to buy or sell an underlying asset at a specific date in the future. Now, a number of these individual customers, anxious about their money even if it is considered safe, are saying they are encountering delays in receiving wire transfers of their funds and having problems getting through to Refco representatives. These investors are supposed to be able to get their money quickly: Regulations require that those funds in the regular course of business be held in so-called segregated accounts at the Chicago Mercantile Exchange and other markets that trade futures. Such exchanges are the clearinghouses for trades in these accounts, and Refco has to post a margin -- a portion of the trade -- for each transaction. This margin protects account holders in the event that the broker, in this case Refco, can no longer execute the trades. There is no way to know how many people in total are trying to get their money back, but just as institutional customers, such as banks and hedge funds, have pulled money from Refco accounts, individuals, too, have become less comfortable dealing with a firm whose fortunes have reversed so quickly. Brian Hayes, a 49-year-old investor in Wilmington, N.C., has been doing business with Refco since 1996 and currently has accounts with both Refco LLC and Refco Securities LLC, the company's regulated brokerage arm. Mr. Hayes says he has been asking Refco Securities to wire the $2.3 million in his account to his bank since last week. Mr. Hayes says he hasn't gotten his money or acceptable answers to his questions, despite daily calls and frequent emails. "I've been trying to get my money back, and all they say is that it's in process," he says. Mr. Hayes, who opened the account with Refco a few years after he retired from an executive post with Lehman Brothers' proprietary trading unit, says most of his money is in cash. Early last week he sold the Treasury bond positions he held in the account. Mr. Hayes says he received an email from a Refco representative yesterday saying that his wired funds are at Refco's agent bank but haven't been released. "Hopefully soon," Mr. Hayes says the note said. The frustrations that some investors are experiencing at least in part reflect how inundated the firm is with similar customer requests, which usually take a day or two to process but can take longer when calls are coming in thick and fast. "There's a possibility that they could have been overwhelmed with wire requests," says John Murphy, head of JTM Investments, an independent broker in Charlotte, N.C. Mr. Murphy said he received six wire transfers in the past week on behalf of clients from Refco. But Mr. Murphy says he also hasn't been able to transfer accounts on behalf of clients from Refco Securities to another clearing firm. To be sure, a big chunk of change has found its way out: Refco's core futures business had over $4 billion in customer accounts earlier this year, but between $850 million and $2 billion of that has been withdrawn, according to a person close to the company and Refco competitors who have been signing up new customers. Some customers who opted to keep their accounts with Refco's futures-trading unit have been told by Refco brokers that they should deal elsewhere until the dust settles. "Individuals have been telling us to trade with other banks or brokers until things clear up," says David Kaplan, a portfolio manager at LIM Advisors, a hedge fund in Stamford, Conn., that trades commodities futures. Allan Zavarro, global head of futures trading at ABN Amro, says his firm has taken on many former Refco account holders. But he said that those customers remain able to transfer their funds, and that Refco remains able to honor its trades-a point that major futures venues like the CME and New York Mercantile Exchange have emphasized. "The truth is, they're in OK shape," says Mr. Zavarro. "On the regulated futures side, you don't have to worry about this stuff too much as a customer. But people respond to headlines." And, like any move, jumping to another broker can be frustrating. "Moving to another broker on the surface is simple," a customer of Refco's private client business-a subsidiary of Refco LLC-wrote in an email. "But it takes a while to learn how a broker operates, where their strengths and weaknesses lie." Retail brokerage Charles Schwab, which says it had referred about 1,000 of its clients who want to trade futures to Refco, has been calling them regularly to keep them abreast of the latest developments. According to a Schwab spokeswoman, the clients who closed accounts had no problems with their wire transfers. Refco's bankruptcy filing in a New York court covered units that cater to hedge funds and other sophisticated clients that traded derivatives typically not listed on any exchange. Regulators and legal experts say the exclusion of Refco's regulated futures brokerage business from the bankruptcy filing is largely attributable to the financial safeguards inherent to those markets. To be sure, blowups are possible in regulated businesses. But off-exchange unregulated units like the frozen Refco Capital Markets-in which the buyer and seller in any given trade are directly on the hook for one another's credit risk-are much more prone to bankruptcy filings, experts say. Securities attorney Scott E. Early said there are special rules in bankruptcy law meant to protect the customers in these off-exchange trades, but payouts are still governed by the court-an unappealing prospect for many funds, banks, wealthy individuals and other deep-pocket market players. -- Ian McDonald contributed to this article.