Commodities broker Refco, struggling with daily revelations in an accounting scandal, said yesterday it will freeze customers' accounts...
NEW YORK — Commodities broker Refco, struggling with daily revelations in an accounting scandal, said yesterday it will freeze customers’ accounts in one of its subsidiaries for 15 days because the unit may not have enough cash on hand to operate normally.
The news, coming one day after Refco’s chief executive was indicted on federal securities-fraud charges, prompted the New York Stock Exchange to halt trading in Refco’s stock, which may become a permanent delisting if the company doesn’t give investors more information on its finances.
In addition, the company’s credit ratings were slashed, with Standard & Poor’s warning that there was “substantial doubt” about the entire company’s liquidity. And analysts said that while its other subsidiaries appear to be running normally, Refco’s customers — which include a number of hedge funds involved in Refco’s main derivatives and futures trading — may decide to move their accounts elsewhere.
The frozen accounts are held by Refco Capital Markets, an unregulated offshore broker for stocks, bonds and currencies that former CEO Phillip Bennett, 57, allegedly used to help hide up to $545 million in bad debts.
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The Justice Department on Wednesday charged Bennett with allegedly causing Refco to file fraudulent statements to securities regulators because of his activities.