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.
It's a hoot.
Why do you keep making my point?
Moron.
Dumb.
Clown.
Dope.
Potty training.
You must be mighty proud of your mad debating skillz. I guess a whole bunch of ad hominems helps you feel better about yourself when you've been made a fool of, eh?
Next time, you might try not spouting off about that which you are unfamiliar with or unable to prove.
Economic bump
Prove what?
Forgetful much?
Others had advance knowledge of this Refco crisis
inside information was acted upon here with REFCO
Prove it or STFU, you're tiresome.
Somebody's hedges are getting trimmed.
You are just plain dumb if you think certain big guys *DID NOT* have advance insider information on the REFCO collapse. This was a criminal masking of losing positions by the REFCO CEO. Word of this kind of illegal shenanigans gets out long before the suckers (such as you) can even twitch
Thanks you guys, for keeping the thread bumped!
;^)
A good post. If one is truly hedging, he is essentially locking in a known profit. If one is seeking to profit, then he is simply speculating.
Producers and distributors fall into the hedge category. These are the pros, although occasionally greed may get the better of them, as happened to one grain distributor who had already sold his wheat but held on to his short wheat position, feeling that surely the price of wheat would drop and he would further profit. The guy ended up bidding wheat to a new record high of $10.00 a bushel before they let him off the hook. Ooops!
It could lead to a depression if anybody else joins in and a panic starts. That would be classical theory. But, so long as the consumer side of the equation doesn't change, this is unlikely to snowball.
What's your take on this?
It is coming to be that many corporate management offenses are thrown into criminal rather than civil law. Somehow this makes offenses seem worse, but they are really the same as ever.
Take The auto sector, the housing bubble, interest rates, energy prices, the risk of a cascading collapse of derivatives and add one more natural disaster, mutated bird flu, or a plain old fashion terror attack and you have one good old dark age on your hands. The sheep will make a deal with whoever can restore their reality TV at the price of what is left of the bill of rights
certain big guys
LOL. Names. You don't have any. Here's a hint: There aren't any.
This was a criminal masking of losing positions
Ah, no, it wasn't. To date, there have been exactly zero allegations of any such thing. There are no "losing positions." There were YEARS-old unpaid debts from one or more defaulting customers which were disguised as a loan due from Bennett's company. He coughed up the $430 million last week. So much for your "losing postions," genius.
Word of this kind of illegal shenanigans gets out long before
Yet more ignorance. The last reported short interest was a whopping 207,000 shares. Out of 127,500,000. 16/100ths of 1%. So your "certain big guys" weren't busy shorting it, now, were they?
How about statutorily-defined corporate insiders? Oops. There were no insider sales filed in the 2 months since the IPO. In fact, all insider activity has been on the buy side.
In fact, RFX spend the entire 2 months since the IPO in a narrow range from 26 to 30. In fact, it was in the upper half of that range when Refco announced the problem on 10/10. The two days immediately prior were quiet, both with volume of less than 170,000 shares. A week prior to the 10th, it had just run up about 2 bucks to 29.91 on almost a 1/2 million shares. That's hardly how a stock under heavy selling pressure from "certain big guys" acts, is it?
Not to mention that "certain big guys" would have had to buy the stock since 8/11/05, the date of the IPO, in order to have had any shares to sell. Since the disguised loan was the result of a years-old problem, and your "certain big guys" knew all about it, why would they be buying it in the first place? Of course, they wouldn't be, except perhaps in your pitifully uninformed, but apparently highly paranoid, mind.
So, what do you have?
No insider sales.
No significant shorting activity.
No evidence of concerted selling prior to the announcement.
No reason for "certain big guys" to own it in the first place.
It's well past time that you stopped digging the large hole you're in.
"You are just plain dumb if you think certain big guys *DID NOT* have advance insider information on the REFCO collapse"
If you mean advance info on saturday or sunday instead of 8AM monday morning, you may be right, but I don't see why that matters.
If you mean before that, during the prior week's trading hours, I request that you show me where on the chart such info was sold into. It isn't there.
Please correlate 8am monday 10th news release with intrday action on monday, as well as the prior week. This was kept VERY tight. The stock it too thin to short much anyway, and anyone who did that or did any large option trades is just asking to be busted.
" Yet more ignorance. The last reported short interest was a whopping 207,000 shares. Out of 127,500,000."
All of your points are good, but in the interest of being fair in arguement it is notable that a fairly large % of the 127M outstanding is locked up one way or another, doubtlessly.
They actually kept this pretty quiet, the crowd never saw a thing coming. Wonder how dip buyers caught in the halt feel now, this could be as bad as being halted in CAFE.
From my limited interaction with REFCO, these guys are scumbags and deserve what they get. I'm just surprised they hid it for so long. And that they didn't clean it up before they went public.
As of 8/11/05, the buy-out firm, the guys that did the whole deal to take it public, Thomas H. Lee Partners, owned 48,721,076 shares or about 38%. They still own every single share.
As of 8/11/05, Bennett owned 29,337,885 shares or about 23%. He still has 'em all, too.
Likely ultimate value: 0 or close to it. The only thing of any significant value left is the $4 billion block of customers in Refco, LLC, the futures division. What might Man Financial or someone else pay for it? Probably not a whole lot.
Exactly correct.
How they ever let one or more customers get into them for $430 million a few years back will be interesting to find out.
Bennet fooled Hill Partners, Grant-Thornton, Goldman, Credit Suisse and Bank of America, and some combination of various exchanges, the NFA and the CFTC.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.