At this point, I don't think there is a possibility of outright fraud on client seg funds. So far it is just what some auditors call "receivable shuffle" accounting trick (illegal if not disclosed, of course) to make the bottom line look better. And the good thing is that Refco, is that they are attempting to disclose every possible problems now. That is the right approach, and very consistent with Thomas H. Lee's benevolent style of management. It is better to come clean now (rather over disclose than under), rather than skeletons found by SEC. I think the firm has a chance to survive, which is why I set the $7-8 bottom. I am a Refco customer for some of my business, and so far I am less freaked out than some of the people I know at Refco. However, at $8 bottom, how long would THLee tolerate the loss is something I wonder about. As a customer, I am stay put.
Agree. This issue is not costing Refco any money [cash] right now... maybe later in SEC fines and lawsuit settlements. The stock price however, could go well below $7-8..... but that wouldn't be a concern for customer accounts.
Yeah, but you have to wonder how much they even really know at this point -- it could take a bit of time to unravel such a mess...
Yes, my $7-8 bottom is starting to look shaky now (if I am a real analyst, I would be revising my price target downward now, but I am not, so I am stick to the call). See this news article: http://www.marketwatch.com/news/yho...o&guid={DF01D229-7FD8-4297-9DD8-DDEBAAC81CEA} Quote from the article: " ... Liberty Corner Capital was paid for telling Refco's auditors that it owed the debts even though Bennett's companies owed the money, ..." This is out right fraud. At this point I believe that soon arrest warrants will be handed down, at least Bennett and Maggio, maybe 1-2 more. The stock will tank even further. This is the first piece of news that make me quiver. If SEC can demonstrate a "system of hiding losses and investor deception", then Refco is effectively finished as a firm. Corporate governance and securities manipulation is such a hot issue right now (after the recent scandals and blowups), and Refco ran smack into it. Bennett tried on monday to buy his way out of the problem, by repay in cash (since then it has come out that he pledged his equity in Refco to a bank as collateral for the loan). I believe the bank will try to sue Bennett with failing to disclose materal information related to the collateral. Hell, I believe that if Bennett give all of his equity *now* to the SEC (38% of Refco), it won't make the problem go away now.
Some more Refco Press Coverage..... Questions Over Deals at Refco Dating to '98 http://www.nytimes.com/2005/10/12/business/12refco.html T.H. LEE TAKES A BATH AFTER REFCO SCAM, INVESTIGATION http://www.nypost.com/business/55203.htm
The fraud occured on the REFCO CAPITAL MARKETS SIDE of REFCO HOLDINGS, and not on the futures side . . . ie.) Refco LLC.
I read in one of those news that the total equity of Refco is around 400m, doesnt some more bad debt make it likely become insolvent? Granted so far it is only from Bennett, and maybe there is no more bad debts but who knows... While we are at it, can someone explain the legalities of segregated funds? Is my money actually accounted for at the bank separately from others monies? Also, Refco charged me $50 for wiring the money to the US Treasury to buy a Tbill. I was happy to pay that because i assumed that meant the money was held in my name at the Treasury, was i correct? if they held it in one big pile in refcos own name why should they charge me the wire fee? any other comments on keeping money safe? how many people actually look at the financial statements of your broker to determine their creditworthiness? not that the statements are any guarantee that there is no fraud of the kind we are discovering now... K