REFCO bankruptcy: No Gain without pain for Refco
In a motion filed with a US bankruptcy court at the end of June, Refco announced that it had entered into an agreement to sell its retail FX business, including customer account information and related assets, to Gain Capital Group. Both parties announced that, under the proposed terms of the deal, Refco FX’s clients could recover up to 100% of their currently frozen account balances.
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.
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%