Refco Stiffing Its Customers

globalfxtrainer · Nov 3, 2005

Quote from Cdntrader:

REFCO STIFFING ITS CUSTOMERS

By RODDY BOYD
--------------------------------------------------------------------------------
PHILLIP BENNETT
Bail call.
Photo: AP
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October 29, 2005 -- Lawyers for collapsed futures trading giant Refco Inc. are trying to treat investors' cash and investments as debt that doesn't need to be immediately returned to the bankrupt firm's customers.
Instead of classifying the cash and investments as client property and returning them as soon as possible, investors with accounts at Refco Capital Markets might have to settle for around 40 cents on the dollar â the same as if they had lent the firm that cash.

Refco's lawyers made the motion at a meeting with creditors yesterday.

Meantime, Refco's disgraced chief Phillip Bennett was scrambling to find six people to guarantee the $50 million bail set after he was arrested on securities fraud charges.

His lawyer, Gary Naftalis, said Bennett had put up $5 million in cash and $16 million in real estate, but that his former colleagues and friends were reluctant to guarantee the bond given the case's high profile.

"This is a man who sold $200 million in stock in August," said David Esseks, the U.S. attorney prosecuting Bennett. "The money has got to be somewhere."

U.S. Magistrate Judge Frank Maas ordered Bennett to produce a sworn financial statement by Tues. Nov. 1, and will likely rule on his lawyer's bond reduction motion shortly after that.

Yesterday's motion wasn't the first time Refco clients' funds have become an issue.

Earlier this week, hedge fund pioneer Jim Rogers and another Refco client, Inter Financial Services Ltd., sued the firm seeking return of about $520 million. Rogers' fund has about $340 million tied up in Refco.

J. Gregory Milmoe, a lawyer for Refco's bankruptcy attorney Skadden, Arps, told creditors that the matter might have to be decided by a U.S. bankruptcy court judge.

But even if the court rules that Refco's client capital was for investment purposes, there is still about $16 billion in debt that has to be paid off, and much of that is either guaranteed at the regulated futures trading subsidiary or secured by the firm's assets.

"Any way you look at this, many of the Refco Capital Markets clients are going to have to take some [loss] on their positions," said an investor in Refco's junk bonds. "There are no hard assets to be sold, and the cash from the sale of the units is going to go to pay down bondholders," he said.

Refco's initial public offering underwriters Goldman Sachs, Credit Suisse First Boston and Bank of America Securities are staring at a combined $190 million in liability, according to a research report from S.C. Bernstein analyst Brad Hintz.
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This is precisely what concerns me about RefcoFX Associates, LLC. If Refco Capital Markets is allowed to treat customer funds as their own property, it seems clear that a precedent for the treatment of customer funds in the other unregulated operating units is set.

Chagi · Nov 3, 2005

Quote from ZoneTrooper:

Note, it looks like in Canada some FX dealers have some insurance that protects your from all this mess. REFCOFX Canadian clients aren't in trouble, it's business as usual for them.

Where is Alexander Hamilton in all this mess???

Judges/DA/Congressmen should stop studying Jefferson, and follow Hamilton's advice when making laws concerning the markets.

Market in the US are not safe!!!!

Do not invest in the US with US brokers.

The government is parternering with Refco and their fraudulent ways by allowing this environment to exist.
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I believe you are referring to the CIPF (Canadian Investors Protection Fund), I don't know enough to go over this in detail, but I think it's somewhat similar in concept to our CDIC (which insures bank accounts).

meyer23 · Nov 4, 2005

I have some dumb questions any help is appreciated as I have alot of money tied up with Refco fx

Will refco fx account holders be treated differently from refco capital account holders?

What is the likelyhood of getting our money back?

Is their a class action suit for account holders?

What if anything should I do?

Thanks very much
meyer

uninvited_guest · Nov 4, 2005

Quote from meyer23:

I have some dumb questions any help is appreciated as I have alot of money tied up with Refco fx

Will refco fx account holders be treated differently from refco capital account holders?

What is the likelyhood of getting our money back?

Is their a class action suit for account holders?

What if anything should I do?

Thanks very much
meyer
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I also have a RefcoFX account and do not believe we will get anything back. I think that all the accounts were lumped into 1 account to be used by RefcoFX how ever they wanted. Refco is in debt, so where would the money come from to repay the account holders?

I don't think the FXCM deal will help us.

killATwill · Nov 4, 2005

i had an account with refco private clients (used to be lind-waldock). called them to wire me my money and they did, no problem. did that yesterday.

WinSum · Nov 4, 2005

It's a shame that a reputable firm like lind-waldock got drag into the mud by refco.

uninvited_guest · Nov 4, 2005

Quote from WinSum:

It's a shame that a reputable firm like lind-waldock got drag into the mud by refco.
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I think a few companies got taken by Refco. Refco even got to ring the NYSE bell.

donaq7 · Nov 4, 2005

money is not safe in u.s. markets look else where to invest our finacial sytem s------ks

uninvited_guest · Nov 4, 2005

Quote from donaq7:

money is not safe in u.s. markets look else where to invest our finacial sytem s------ks
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With grammar and spelling like that you shouldn't be giving advice.

kowboy · Nov 4, 2005

Quote from donaq7:

money is not safe in u.s. markets look else where to invest our finacial sytem s------ks
More...

Where?