Refco Bankrupt and Brokerage CUSTOMERS Lose Their Money!?!?!

September 25th, 2007

Nothing pisses me off more than when something that is unjust and wrong occurs. A few years ago I decided to give Forex a chance and try trading. While I was still learning I decided to get some money into a brokerage account so it would be ready for me when I decided to begin trading. I looked all over for a good Forex broker. I initially was filling out the forms for FXCM. About halfway through filling out the forms I realized that both Refco and FXCM had the same platform, website and forms… they were basically the same company except they were legally run separately. So I stepped back and decided to choose the safer of the two. It turns out Refco was a multi-billion dollar company with some other massive divisions in Bonds. It was clear… Refco was by far the largest of the two, and I figured the safest.

The Bigger They Are, The Harder They…

So I ended up going with Refco. Within a few months I realized Forex wasn’t for me. I never made a single REAL trade… instead I stuck with the Forex simulator. A few months later I stopped trying and gave up on the idea but I left my money in the brokerage account (mistake #2). A few more months passed and then Refco got into some financial trouble. It appears that their bond division suffered heavy losses and bankrupted the company. My money was now frozen inside a company going through bankruptcy.

Refco’s FX Division Was Highly Profitable So It Will Be Sold… Right?

Several times it looked like Refco’s FX division might get sold but the bids that came in for the company wasn’t high enough according to the creditors. It’s my estimation that the creditors knew that there was more money sitting in Refco FX’s coffers… their customers money. Since that money was classified as unsecured loans, it was not safe and the creditors had a chance to take it if they kept Refco FX rather than sell it. And so they did… they’d rather steal customer’s money.

The Part That Pisses Me Off

I never ever LOANED money to Refco. I was a customer and my money should never be classified as unsecured loans. Yes, Refco was holding my money, but it was NEVER A LOAN. They could not use that money for anything… If it was a loan, they would have the ability to use my money. Only I could use that money because I DIDN’T LEND IT. This is the part that now scares me away from small brokers… I imagine most of them can do the exact same thing and use customer’s money to pay for debts if they go bankrupt!

Even though I never lent a dime to Refco and was just a customer it took several years. Just yesterday I got a check for 40% of my account balance. That is all I will ever see. I didn’t lend or invest in the company; I was merely a customer… Since when do customers get their own money ripped off so blatantly. I consider Refco FX and the banks/lenders that took some of my money to be thieves. I don’t care if they did it legally… it was an act of thievery. They stole my money and a lot of other people’s money. That is wrong. We weren’t the ones who invested or lent money to the company, we were merely the customers who’s money was still sitting in the accounts… but they took it to pay their debts. That is wrong.

The Other Piss Off?

If I would have invested in Refco FX Canada (the Canadian division) I would have got every penny back… and I almost did sign up for the Canadian division. Sigh.

Forex Just Wasn’t For Me, But Without Executing A Single Trade I Managed To Lose 60% Of My Money…

The worst part is what I was going to do with that money… I would have turned about $3,000 into over $15,000 today if I would have had access to it.  I was going to invest it in Garmin… Read about that here.  I guess I’ll have to settle for $1,164.40 instead.

Entry Filed under: Articles