The United States Commodities Futures Trading Commission announced on Wednesday that it is monitoring the bankruptcy proceedings of the stricken brokerage firm Refco Inc to ensure that customer funds on deposit with the company's futures trading unit, Refco LLC, remain "uncompromised".
"The CFTC continues to monitor the actions taken by Refco Inc. -- including yesterday’s bankruptcy filing -- to determine what, if any, effect they may have on Refco LLC," the commission, which regulates US futures exchanges, said in a statement.
It added:
"The CFTC’s auditors and attorneys are actively engaged in re-confirming that Refco LLC’s customer funds on deposit remain uncompromised and that the capital requirements of Refco LLC continue to be met."
"The CFTC is working closely with all interested parties including, among others, the Securities and Exchange Commission, the Department of Justice, the Chicago Mercantile Exchange (the designated self-regulatory organization for Refco LLC), the National Futures Association, and the Bankruptcy Court for the Southern District of New York."
On Monday, Refco Inc. filed the fourth largest bankruptcy in US history. The firm was plunged into crisis after its former chief executive Phillip Bennett was charged with securities fraud relating to a $430 million debt hidden in an undisclosed account.
Refco Inc has agreed to sell its core futures trading unit, which includes US-based Refco LLC and its UK and Singapore subsidiaries, to an investment group led by private equity fund J.C. Flowers & Co. LLC for $768 million.
Refco is said to have in excess of 1,000 creditors, the largest of which are the Austrian bank Bawag International Finance with claims of $451.2 million and Wells Fargo Corporate Trust Services, with claims of $390 million.
However, despite its stature as the largest independent futures brokerage in the United States, Refco's downfall has had little impact on the markets beyond its own valuation, which has lost nearly its entire value.
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