Posted on 10/14/2005 11:30:39 PM PDT by Travis McGee
World's hedge funds face crisis as Refco suspends trading
· Leading global broker admits 'liquidity problem'
· Billions of pounds could be tied up in frozen deals
Jill Treanor
Friday October 14, 2005
A crisis in the world's hedge fund industry was in prospect last night after one of the world's largest derivatives brokers was forced to freeze trades potentially worth billions of pounds.
The move by Refco, which acts for many leading speculative investors both on Wall Street and in the City, followed the discovery of accounts irregularities at the firm earlier this week and the issue of fraud charges against its former chief executive Phillip Bennett.
Mr Bennett has been charged with defrauding investors by using a hedge fund to hide $430m (£250m) of debts owed to the firm. A British banker who has lived in the US since 1978, Mr Bennett has been released on bail of $50m secured on a house in New Jersey, a Park Avenue penthouse apartment, $5m in cash and funds raised by six co-signers of the bail bond.
The implications of the 15-day trading moratorium on the company's Refco Capital Markets subsidiary may be felt across the world financial system, depending upon the size of the funds caught up inside Refco and the types of institutions which are unable to remove their money from the operation. By locking the clients in, Refco, which has debts of $642m, is preventing a possible mass exodus of funds which could further jeopardise its trading position. While the company gave no details of the size of the funds it had tied up in its capital markets arm, it described the operation as representing a "material portion" of its business.
The rest of the article linked HERE.
Maybe people need to go to jail rather than being bailed out this time.
Most of the risk comes from perfectly legal actions.
It depends entirely on the purpose of owning the derivatives for the individual fund. [disclaimer: I manage a hedge fund]. First, there are many kinds of derivatives. The futures market is larger than the stock market. Those futures contracts are used for many purposes - primarily to transfer risk.
Admittedly, there are firms like the one in the article that use derivatives in a very risky manner. I objected primarily to the title, which painted dire consequences to all hedge funds. This was a small event in the grand scheme of things.
best, ampu
It can now be safely concluded that you have zero proof of it.
That has nothing to do with anything, moron. You know and I know that the big guys had inside track and inside info on the REFCO bust
LOL. You spout half-baked, unsubstantiated crapola and call me a moron?
Smooth.
I won't hold my breath waiting for you to post the proof you don't have that anyone with knowledge of the problems acted on that knowledge.
Thanks for the ping. This happened last Thursday I believe, and is only a portion of Refco dealings, and doesn't represent any segregated customer funds.
Guardian makes it sound extremely gloomy when in fact, it's just gloomy. :^)
Wasn't Sarbanes-Oxley supposed to protect us from this kind of thing?
LOL Are you a lawyer? My common sense level of proof is enough.
It can now be safely concluded that you have zero proof of it.
i dont know if refco cleared those trades, but it is VERY possible that was just a series of straddles put on by a local broker to facilitate a tax-deductible payoff by other locals. I cannot imagine it even got on the clearing firm's radar.
"The only ones who are really effected are the ones who owned REFCO stock. "
As well as the impressive liability the underwriters are going to be facing, along with the company itself.
It is amazing arrogant stupidity that ceo let this co. go public with this in the closet waiting to be found. This could have been handled internally as a private co. and they could still have tried to go public in a couple of years. As it is, the existing equity holders are in peril of a wipeout. Is this stock every going to trade without a Q again?
ping
Yes, probably right. My memory is certainly not good enough to remember the details.
Thanks, and I hope you'll chime in now and then on these financial shennanigans threads. If you do, please ping me.
Boy are you ever dense. Did you fail the bar exam so now you are a pretend lawyer?
You're a master of the 3rd-grade insult, but apparently not much else.
Tell us again all about gold being up $25 in the last 2 weeks.
LOL.
I love the internet. Where else would discussion of a hedge fund turn mean?
So gold is up 25 in the last two months instead. So I don't track gold like you do. So what ya big dope!
I owned physical gold and silver while that antiscumbag clown was still bing potty trained and it looks like he didn't take to it very well.
BOOKMARK for later ref
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