Customers of the defunct Refco Capital Markets Ltd. who claimed principals at the firm violated securities laws by abusing customer securities pledged for margin trading through the firm’s own trading have lost their bid to recover monetary damages.
The U.S. Court of Appeals for the Second Circuit on Jan. 10 found investors failed to allege deceptive conduct by the principals because the investors knew what they were getting into when they signed a standard agreement allowing Refco Capital Markets to “rehypothecate” or otherwise use securities and other property held in customer brokerage accounts to secure margin trading.
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