Refco's forex clients sue

Refco Inc.'s retail foreign-exchange customers has teamed up with an electronic currency-trading service in a lawsuit that seeks the return of at least $10 million from the company, which crashed into bankruptcy nearly a year ago. The customers, who so far have been sidelined by bigger Refco creditors in the race to retrieve assets lost in the company's collapse, said in the lawsuit that Refco's foreign-exchange subsidiary assured customers at the time of the collapse that their accounts wouldn't be affected. As a result, many customers continued to deposit funds with Refco. Refco, once one of the country's biggest commodity brokerages, has since said that it is winding down its operations and that it expects to complete its Chapter 11 proceedings by December. The company, in a comprehensive plan to pay its creditors, has offered to pay customers of its foreign-exchange subsidiary about 26 cents for every dollar they're owed. In their lawsuit, filed with the U.S. Bankruptcy Court in Manhattan Tuesday, Refco's foreign-exchange customers demanded full payment, saying they're owed at least $10 million in cash and securities. They said those assets are currently controlled by Refco's Bermuda-based unit, Refco Capital Markets Ltd. The customers were joined in the lawsuit by Forex Trading LLC, a former business partner of Refco's foreign-exchange subsidiary. Forex Trading, also known as FXCM, has served since 2002 as trading manager of at least 15,000 retail Refco foreign-exchange accounts. Earlier this year, FXCM offered to buy the Refco subsidiary, Refco F/X Associates, for $110 million. But the deal fell apart. In their lawsuit, FXCM and the foreign-exchange customers said despite assurances that money in the customers' accounts was safely segregated, the funds were transferred to Refco Capital Markets because Refco F/X thought the money would "earn higher interest rates" there. They said Refco Capital Market owes $83.4 million to Refco F/X. They said most, "if not all," of that money belongs to foreign-exchange customers. They asked a judge to designate it as property of the customers.