Refco Wins Lawsuite Against Customers

Z

ZoneTrooper

Refco Inc., the bankrupt futures broker, persuaded a judge to halt lawsuits by customers seeking to recover $1.8 billion in their accounts.

Refco claims the accounts are debt, not customer property, meaning customers might not get all their money back. Customers argue the money is theirs, and is being held by Refco. U.S. Bankruptcy Judge Robert Drain at a hearing in New York on Friday agreed to delay the suits at least until Dec. 8.

"We intend that there will be adequate protection procedures in place so that assets people think belong to them will be there at the end," Anthony Clark, a Refco lawyer, told the judge before the ruling.

Eighteen customers have sued Refco Capital Markets Ltd. since its parent company filed for bankruptcy protection Oct. 17. Among them are investment funds run by money manager Jim Rogers, demanding the return of $362 million.

Tom Cauley, a lawyer for Rogers, had told the judge his client wanted his claim brought to trial Dec. 12. Another customer's lawyer claimed that Refco accounts may be short by $1 billion. Clark said Refco will give customers detailed information on assets remaining in 3,000 Refco Capital Markets accounts by Dec. 5.
 
Quote from uninvited_guest:

Will this affect the FXCM/RefcoFX deal?

I don't think so.
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I hope it doesn't affect the FXCM/REFCOFX MOU.:D :D :D

But the position of REFCO's legal council states in the press and i court I find very disturbing.:mad: :mad:

I'm an employee of a rather large company, and have dealt the my corporation's legal council, and I"ve noticed that my corporation's legal council opinion does not represent the management views on what they can and will do...::p :p :p

In fact, often legal council of the reading of a contract in such a matter that ticks off the customer or causes the customer to harbor ill will towards the company, even if is legally permissible is often ignored, as they escort the lawyers out of the conference room.

Lawyers, may help in a court room setting, but when cutting deals, they often will destroy any good will that the other party has towards you. :p

The question here, is REFCO doing the nuclear option?

Do they really care if they destroy the markets?

I think the employees and management of REFCO do care if hte markets will weather this situation. After all, they do want employment after REFCO folds.

And if REFCO folds with a lot of bitter customers, Ex-Refco employees may not be welcomed for employment with other firms to readily.

But how much control does Refco Management able to exert on their lawyers?

Is the outcome of the situation only up to the lawyers and the Judge?
 
Lawyers have a ethical/contractual responsibility to act in the best interests of their client. Of course the client may direct the attorney to act otherwise, but in bankruptcy, the judge decides.

In my very limtied reading of all this, it has always struck me that these type of firms, esp in non-reg products, simply claim their customers are unsecured general creditors, which is what the Refco lawyer seems to be claiming. It means you get on line with the guy they buy pencils from to get your money.

You gotta read the fine print before sending folks money.
 
refcofx assets will be auctioned, but as regards client accts, honestly can't see the judge approving of a deal that wld give preferential treatment to a particular sub-class of Refco Inc creditors - unreg refcofx non-segregated acct holders - vs other RCM acct holders for instance... think the first step shld be for a judge to rule on whether customer monies are part of the bankruptcy estate or not, which is another couple of weeks away... and maybe thats where this great piece of PR, the fxcm MoU, as well as continued acct holder activism etc, can be brought to bear...?
 
Quote from tomcole:

In my very limtied reading of all this, it has always struck me that these type of firms, esp in non-reg products, simply claim their customers are unsecured general creditors, which is what the Refco lawyer seems to be claiming. It means you get on line with the guy they buy pencils from to get your money.
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correct. one way around that tho, is have your broker set up a properly segregated acct to hold your available margin equity for instance, and sweep monies regularly from your non-seg acct to your seg. acct... understand IB does that... am currently getting my 'prime broker' to implement that for my clients... makes pulling teeth look easy but...

in any event, the less idle money one has on (a non-seg) acct at any fx broker, the better...

tomcole - just curious, wld u say the fine print is any more client-friendly / in favour of the client when one is trading via a bank as opposed to via a broker?
 
Bank v broker fine print is a good question.

I humbly submit that it depends on the circumstances. In a court run bankruptcy, I doubt anything but the judge matters. In other cases, again, IMO, its the rep of the firm that matters. I once had a boss rip in half a document that lawyers had spent weeks writing and he said if we need 10 pages of fine print to trust someone, we dont trust them, so why bother ?

I think if you're going to have a problem with a firm, I'd rather have a problem with a firm which has an unblemished record. But in the end, if they start qouting sub-paragraph 3, sentence 14, you know you're getting screwed!!! So, no, once they wheel out the fine print, be it broker or bank, you know its going to be a hassle.
 
Quote from tomcole:

.....But in the end, if they start qouting sub-paragraph 3, sentence 14, you know you're getting screwed!!! So, no, once they wheel out the fine print, be it broker or bank, you know its going to be a hassle.
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I read a few years ago that singer Bryan Adams has had no contract with his manager (Bruce Allan) for the last 25 years.

It's all based on trust.
 
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