This is what's been reported. Uncollected debt from third parties, not proprietary trading.
Thanks for the ping.
Bennett tried to recoup through the IPO; the mkt put a multiple on his shares, which he promptly pledged to a bank for a loan to pay off the dinger. When $430 mio of putative 'assets' are both nonexistent to start and subsequently created in this fashion, the technical term for such a situation is 'securities fraud'. This is even less subtle than what Bernie Ebbers tried, btw, and Bennett is in for a long visit to the Graybar Hotel.
The interesting question is: since Bennett could not have pulled this off by himself, who else will get to enjoy a stay in chokey? Thornton? That would seem likely. Grant? Maybe, hard to say at this point. REFCO Capital Markets compliance people? A good bet, some of them.
The sequel here should be fascinating.