Thanks to Refco

12 October 2005 By Rob Cox Follow @rob1cox

There are many unanswered questions stemming from the hidden loan the US futures broker extended to its nowarrested boss Phillip Bennett. For those trying to deflect further hedge fund regulation, most troubling is the apparent role of a hedge fund in helping with the coverup.

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Refco's former boss, Phillip Bennett, was accused of securities fraud by the US District Attorney's office in Manhattan.

Bennett was accused of paying a Refco customer to help him hide a $335m loan received from the company to an entity Bennett controlled. Refco went public in August.

Bennett was accused by the attorney general's office of concealing the fact that the money was owed by a party related to Bennett, and not by the client.

The customer in question was Liberty Corner, a New Jerseybased hedge fund, according to the Financial Times and Wall Street Journal. Liberty Corner declined to comment.

On Monday, October 10, Refco announced that it was owed approximately $430m by Bennett's company, which subsequently paid Refco back. Refco's stock plunged by almost 52% over Monday and Tuesday, wiping out more than $1bn in market capitalisation.

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