Older Scandals
Refco has not enjoyed a clean reputation with regulators. The Commodity Futures Trading Commission and the National Futures Association took action against Refco and its units more than 100 times since the firm's founding. According to The Wall Street Journal, it was "among the most cited brokers in the business, according to data provided by the NFA."
The 1978 "cattle futures" trading scandal was played out in Refco accounts, the period during which the Hillary Rodham cattle futures controversy originated.
In 2001, the NFA ordered Refco to pay $43 million to 13 investors after their Refco broker used bogus order tickets to clear trades.
On May 16, 2005, the company disclosed that it had received a "Wells Notice," indicating it might face charges related to improper short selling at its Refco Securities unit and other matters. The company had been implicated in naked short sales on the stock of a company called Sedona Corp., disclosed that it was negotiating with the SEC and hoped to reach a settlement that would likely include an injunction against future violations and "payment of a substantial civil penalty." Refco put $5 million in reserve in anticipation of the settlement. The company has also been sued by Sedona in connection with this trading.
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