FEDS SHUT DOWN A COMPANY, YOU LOSE ALL YOUR MONEY

Refco, possibly the world's largest futures trading company, has been shut down by the Feds for massive accounting fraud. Customer accounts are frozen and Refco cannot trade. Late Add: My friends on the floor of the Merc tell me that Refco and the Feds are allowing clients to "unwind" their positions. Futures clients won't lose too much because they will put them on again at other firms. The options holders are screwed.

A CAUTIONARY TALE FOR ALL INVESTORS AND SPECULATORS

What happens when one of the world’s largest futures trading company like Refco is shut down by the Feds without warning? Keep in mind that a dominant company like Refco not only has smaller customer accounts, but it has thousands of “hedge” accounts, which are multi-million dollar accounts that are maintained by all large energy (Exxon-Mobil, Texaco, etc.) and agricultural corporations around the world, farmers big and small, every bank in the known universe, as well as many corporations using those markets to reduce their risk. What about the billions in customer money? Where is it?

Answer: their money is tied up, customers can’t touch it, and there is no way they can protect themselves other than by doubling their account size in other markets. Their accounts at Refco are frozen.

What about ordinary customers, you? If the government can possibly screw ordinary people, you know they will do it. They have. While the corporation itself still has some liquidity, it is barred from trading customer accounts and customers can’t close high risk positions. What has happened in effect is that the Fed has actually stolen all at risk money at the firm and donated it to speculators trading through other futures companies around the world. This is still another accounting scandal and the people who signed off on the books include public accounting firm Grant Thornton LLP, private equity firm Thomas H. Lee Partners and Wall Street investment banks Goldman Sachs, Credit Suisse First Boston and Banc of America Securities LLC.

Try suing those guys to get your $5K back. Twenty years from now the case might get to the Supreme Court.

You may have to sue the government and that means going after the CFTC, chaired by Clinton appointee James Newsome. Unlike other crony appointments, Clinton appears to have appointed a guy who knows the business, even though the suspicion persists that Newsome was named specifically to hide Hillary’s cattle trading records; Mr. Newsome has been the Executive Vice-President for both the Mississippi Cattleman's Association and the Mississippi Beef Council; he would know how to bury Hillary’s account records forever.

Hillary traded through (surprise) Refco.

Refco is known by every broker in the business for their shady dealing. They have a supposed currency trading system that is basically guaranteed to take all customer money; they refuse to correct “bad fills” on orders for small accounts; was known to have accepted trading accounts for independent brokers who charged as much as $99 round turn for ONE contract (options or futures---average commission in the business is $7), $99 is a sum almost guaranteed to insure a customer loss and a broker profit. Refco has been too big to fail for far too long.

Refco might be THE biggest fish in the commodities tank with supposed assets in the billion dollar class and their stock holders are totally fucked. Just to give you a small idea of part of the fraud, consider this from a very good article appearing in the Washington Post

.....lent an unidentified Refco customer $335 million to be repaid in March. On the same day in February, according to the criminal complaint against Bennett, the unidentified customer lent the Bennett-controlled entity, Refco Group Holdings Inc., $335 million. Refco Group Holdings then allegedly used the money to pay down its debt to Refco Inc.

So a company that has been on the edge to say the least, has now gone down the tubes and the only people who will pay damages are their innocent customers. To make it even worse, Goldman Sachs, one of the corporations that was supposed to supervise the Refco books, has been named by Refco to investigate. Goldman is involved in far to many of these “scandals” to be trusted any more.

Cutting to the chase: if you’re a Refco stockholder you are fucked. And if you are a Refco customer you are fucked.

Trading futures is far more riskier than you thought.