Refco Losses Hid For Decade
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A district court in New York has heard that Refco CEO Phillip Bennett hid losses at the distressed futures broker for more than a decade. The period covered the IPO of Refco in August this year. "False and fraudulent" statements of its finances led to the company raising $538m. Losses were hid from investors by filing false or misleading information with the Securities and Exchange Commission. Prosecutors argue that the action took place as early as the 1990's. The losses were caused by clients borrowing money from Refco to trade in the markets. As the loans were not repaid because clients had themselves not been successful, Refco felt the brunt. British-born Bennett proceeded to hide the losses in a Delaware based corporation. In 1999 the operation had to increase in scale due to the large amounts involved. Others had to create transactions so that Refco's auditors would not discover the scam.
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