One would have thought that the 15,000 clients concerned would have jumped through rings of fire to see the deal finalized. However, a group of them have made their dissent heard, much as they did when Refco proposed to sell the unit to Forex Capital Markets (FXCM) at the tail end of 2005.
Fuming customers
A report in the tabloid New York Post detailed how “fuming customers of disgraced futures giant Refco”, were “calling the shattered firm’s move to sell their accounts to a rival brokerage a ‘raw deal’.”
The terms of the deal are somewhat complex, not unexpectedly since about $103 million of investors’ money is frozen. Gain is proposing that Refco FX clients open an account with its forex.com division. For Refco FX clients who opt to do so, Gain has agreed to fund immediately an amount equal to the lesser of the customer’s aggregate account balance or up to $200 when the new account is activated. Clients with balances of $40 or less would be able to withdraw their funds immediately. For those with larger frozen deposits, Gain has agreed to reimburse as much as the full account balance over a two-year period, payable in 12.5% increments every three months, provided they meet certain trading thresholds.
Gain officials appears bemused by the furore. “The deal is opt-in,” says a spokeswoman for the firm. “That is, Refco FX’s clients are not required to participate. If they do, it is an opportunity to recover 100% of their money. If they don’t, they can still remain a general, unsecured creditor of Refco FXA. And, if they opt in and only recoup a portion of their account balance, they can still file a claim for their remaining balance. The agreement is scheduled to go before the bankruptcy court on August 10 for approval.”
Clearly this sad saga is far from over.
