yes - and with all due respect to et, refco were never the sort of company that would ever do this - although they did run on line ads when they were offering deep discounts on some sales campaign if i remember. the thing is is that folk with 2k accounts arent really the business refco wanted unlike ib. i really hope i dont sound like a snob when i say that. i always thought that refco appealed to the people who knew about the industry a bit - which is how they heard of them, kind of word of mouth thing. without wanting to turn this into a ' flame ib thread' ib say they appeal (also) to those who have some trading experience, not those who are opening their first account. why then, did they ever have account minimums that would only have allowed to trade 1 contract?
After reading 60++ pages of post I have to say that Apex is a real ***. Even after he gave numerous people bad advice telling them to stay with Refco because things would be fine and also telling them that their funds are protected, complete rubbish, he still has the gall to say that people here bear malice towards Refco. I think that this forum has very smart people who just saw the forest from the trees. Just my 2cents
Here's an intermission between the various back and forth bickering about "sanctity" of "Refco LLC": Apparently Jimmy Roger's commodity index funds have stopped allowing redemptions -- due to the fact that the collateral backing the commodity index futures (to the tune of more than $300MM between 2 funds) are now tied up in Refco Capital's backrupcty hearing. So Jimmy Beeland is joining an illustrious group of creditors such as the aforementioned Bawag bank. Now, how in the world that the collateral backing the commodity futures that should have been in the Refco LLC entity ended up in the unregulated Refco Capital unit is a mystery. Can somebody patronize me by explaining this finer point of how the supposedly fool-proof segregated account firewall is breached? The WSJ article said Roger's funds are characterizing this as a "Refco goof". Some blooper. See my next post about financial chain reaction
So here is the disaster scenario for Jimbo Rogers: Jimmy Beeland Rogers (the "investment biker") 's commodity futures index funds are now in limbo -- they are not allowing people to withdraw the funds because all the collateral backing the Rogers commodity index futures are now frozen in Refco Capital. Presumbably Jimmy's index funds are long the futures when the underlying collateral is frozen. If I were a Wall Street shark or a Hedgie, I sense an opening here: I know the investors who invested w/ Jimmy's commodity index funds are spooked -- they probably lost all confidence in the funds -- so they are just dying to exit the funds -- but since the collateral are all tied up, Jimmy can't close out his long futures -- but eventually, and maybe (that's a big maybe) his money will be freed up thru the bankruptcy proceedings), then he will have to close out his positions due to the torrent of redemption requests from his index fund investors. Knowing that he has a high probabily of having to be forced to exit his long futures positions, a hedge fund or a Wall Street shark can front-run Jimmy by shorting the futures, drive the prices down, and then cover when Jimmy is ready to sell and reverse his long positions at a huge loss. Since futures is a zero-sum game, Jimmy's (and his index fund investors) loss would be the shark/hedgie's gain. Is this a plausible scenario? This whole Refco thing is more entertaining than Holloween horror movies. I just love it!!!
This thing just get better and better!! See latest revelation about the origination of the $430MM bad debt. http://online.wsj.com/article/SB112986306329075408.html?mod=home_whats_news_us
Flowers will hike bid if needed. http://today.reuters.com/news/newsArticleSearch.aspx?storyID=112158+21-Oct-2005+RTRS&srch=refco Also says account withdrawls are drying up, the loyal majority remain.
October 21, 2005 Markets Main Refco's Debts Started With Several Clients Bennett Secretly Intervened To Assume Some Obligations; Return of Victor Niederhoffer By DEBORAH SOLOMON, CARRICK MOLLENKAMP, PETER A. MCKAY and JONATHAN WEIL Staff Reporters of THE WALL STREET JOURNAL The $430 million in bad debts at the heart of Refco Inc.'s meltdown stemmed from losses by multiple customers, including money manager Victor Niederhoffer, whose hedge fund suffered heavy losses during the 1997 Asian financial crisis, according to people familiar with the matter. Another of the customers was Ross Capital, one of these people said. Ross Capital is run by Wolfgang Flottl, whose father until the mid-1990s headed the small Austrian bank Bawag P.S.K. Group that last week lent Refco's chief executive, Phillip R. Bennett, money he used to pay off the $430 million. (See related article.) Messrs. Niederhoffer and Flottl both denied owing Refco any money. Reached last night in New York, Mr. Flottl said Ross Capital was never in debt to Refco except for when his firm tapped a credit line, which he said typically was paid back within 24 hours as a normal course of business. "Nothing could be further from the truth," Mr. Flottl said when asked whether Ross Capital owed money to Refco. "Never, never, ever." The crisis at Refco, which this week filed for Chapter 11 bankruptcy-court protection, began Oct. 10, when the futures brokerage disclosed that a company controlled Mr. Bennett secretly had owed Refco $430 million, which the company said consisted of bad debts dating to the late 1990s. A person familiar with the matter said the debts stemmed from as many as 10 customers. Last week Mr. Bennett was put on indefinite leave. The futures brokerage's financial problems may also extend beyond the $430 million, a person familiar with the matter said. This person cautioned that it is too early to gauge the extent of those problems, but that it appeared Refco executives also had manipulated other financial metrics. Federal prosecutors in the U.S. have accused Mr. Bennett of securities fraud for allegedly hiding his ties to the bad debt to improve the company's bottom line and mislead investors in advance of Refco's initial public offering of stock in August. Mr. Bennett has denied wrongdoing, and his lawyer has said Mr. Bennett will fight the charges. Mr. Bennett's assumption of the bad debts let Refco avoid slashing net income and wiping out nearly all of Refco's profits for the past three years, which would have killed Wall Street's appetite for the huge commodities broker's IPO and, before that, Thomas H. Lee Partners LP's deal in 2004 to buy a controlling stake in Refco. Mr. Niederhoffer became a minisensation in the 1990s as a successful hedge-fund manager and author of "The Education of a Speculator," about making contrarian trades. But his hedge fund experienced one of the more dramatic collapses in late 1997, when he suffered losses on an options bet on futures tied to the Standard & Poor's 500-stock index at the Chicago Mercantile Exchange. After taking a leveraged bet that would have gained in value if the S&P index rose or stayed stable, Mr. Niederhoffer received a margin call for about $50 million from Refco, his clearing broker, on Oct. 27, 1997, when stocks tanked amid the Asian financial crisis. Refco at the time denied the loss would cause it broader problems. The people familiar with the matter say they believe the customers, including Mr. Niederhoffer, had no knowledge of the steps Mr. Bennett allegedly took to hide the debts. In a statement posted on his Web site Oct. 13, Mr. Niederhoffer said his former fund, Niederhoffer Investments Inc., Weston, Conn., closed out its debt to Refco with a $2 million payment shortly after the fund's 1997 troubles. "Neither I, nor my firm, nor anyone associated with me has had any loans or financial dealings of any kind with Refco in seven years," Mr. Niederhoffer wrote. Paul Hendry, treasurer for Mr. Niederhoffer's current firm, Manchester Trading LLC in Norwalk, Conn., said yesterday: "There were no outstanding receivables, as far as I would understand it, when we finished our dealings with Refco." He added that Refco covered Mr. Niederhoffer's losses, in part, by liquidating the remaining assets in his account. Likewise, he said, only Refco itself would know precisely how much money it recouped from that liquidation, and how much of Mr. Niederhoffer's debt it covered. According to a person familiar with the matter, Refco may have allowed some financially weak customers to take on overly risky positions. While the mechanics of the trades remain unclear, at least some of the customers' problems were tied to margin loans. Investigators also have turned up evidence that more than one hedge fund was used to help Mr. Bennett hide Refco's losses. Last week, a Summitt, N.J., hedge fund, Liberty Corner Capital Strategy LLC was reported to have been used by Mr. Bennett to conceal the debts. Yesterday, Liberty Corner said it had been told it wasn't the target of the criminal investigation into Refco and that it plans to take legal action against Refco over the matter. Separately, former SEC Chairman Arthur Levitt said he no longer is an outside adviser to Refco. Refco on Oct. 13 announced it had retained Mr. Levitt and former U.S. Comptroller of the Currency Eugene A. Ludwig as special advisers to its board of directors. Mr. Flottl said that Ross Capital began using Refco approximately in the early 1990s as a broker to trade bonds, foreign exchange and futures. Mr. Flottl said that in the late 1990s, Ross Capital quit using Refco. Mr. Flottl also said he traded for Bawag, the bank that his father, Walter, ran until 1994. Mr. Flottl said his father didn't have a business relationship with Refco. The son said that when questions were raised about the propriety of his trading for Bawag, he stopped and the money was returned to the bank. --Erin E. Arvedlund and Kara Scannell contributed to this article. Write to Deborah Solomon at deborah.solomon@wsj.com, Carrick Mollenkamp at carrick.mollenkamp@wsj.com, Peter A. McKay at peter.mckay@wsj.com and Jonathan Weil at jonathan.weil@wsj.com
"Separately, former SEC Chairman Arthur Levitt said he no longer is an outside adviser to Refco. Refco on Oct. 13 announced it had retained Mr. Levitt and former U.S. Comptroller of the Currency Eugene A. Ludwig as special advisers to its board of directors." Leavitt soiled himself last week associating his name with Refco. Dumbass. Why would anyone want their name alongside scandal and white collar crime is beyond me.