$525 Million in Fake Bonds
On March 15, 2006, information leaked by the U.S. prosecutor's office revealed that Refco held offshore accounts holding as much as $525 million in fake bonds. The company held the "securities" for Bawag P.S.K., the Austrian bank with which Refco had a close relationship, discussed in part above, and for a non-U.S. hedge fund called Liquid Opportunity. Apparently, Bawag and Liquid Opportunity jointly owned six Anguilla companies, which in turn owned the fake bonds. Refco's attorneys have declined to comment.
Apparently, the six Anguilla companies initially responded to Refco's bankruptcy filing as a normal customer would have, filing as creditors with a combined claim of $543 million. However, they failed to follow up with any legal filings.
This is presumably good news for other Refco customers, in that $543 million in potential claims on the firm's assets have disappeared. The likelihood that the fake bonds represent some kind of ongoing criminal activity does not bode well for the principals of Refco, BAWAG, or Liquid Opportunity.
Read more about this topic: Refco
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