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In August 2005, the largest broker on the CME went public on the NYSE at a $4 billion valuation.
67 days later, that same company was bankrupt and its CEO was under arrest.
This is the story of Refco 
Refco was founded in 1969 as an agricultural broker, and grew with the industry as new futures products took the market by storm. By 2004, Refco was the largest provider of customer volume on the CME, with 472M derivatives contracts processed that year.pic.twitter.com/RCwK4JyHwB
In August 2005, Refco went public on the NYSE at a $4 billion valuation. The company boasted $1 billion in revenues and over $100 million in earnings. The stock did well post IPO:pic.twitter.com/4UYCity40o
60 days later on October 10, Refco dropped the bomb. Its CEO Phillip Bennet was found to have hidden $430 million of debt from auditors, and was resigning. He would be charged with securities fraud later that week.pic.twitter.com/aPb3rnpvow
Here's where the scandal gets interesting. Bennett paid back the missing $430 million. Refco had enough cash to pay its bills and still operated a successful business. On paper, the company looked like it could have survived.pic.twitter.com/1Es9D3kUDF
Public trust, however, had been broken - and in financial services, your word is your bond. Customers couldn't keep funds with Refco knowing its top exec had perpetrated fraud, and competitors were eager to pounce on the opportunity. Business left in droves.
7 days after the news of fraud, Refco entered bankruptcy. CEO Phillip Bennet faced 19 years in prison, and $4 billion of market cap had been wiped out.pic.twitter.com/mDrubClrG9
AFTERMATH: 1) CME issued statements calming public concern about impact to the exchange. Competing brokers filled Refco's gap. 2) Refco's underwriters were sued on grounds they didn't vet the company pre-IPO. 3) CEO Bennet was released from prison in May 2020 over COVID fears.
Sources: https://slate.com/business/2005/10/how-a-4-billion-company-collapsed-in-a-week.html … https://www.sec.gov/Archives/edgar/data/1321746/000104746905019982/a2156229zs-1a.htm …http://investor.cmegroup.com/index.php/news-releases/news-release-details/cme-statement-refco-llc-and-cme-financial-safeguards-system …
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