Man Group, the world's largest quoted hedge fund manager, has walked away from the auction of Refco, the stricken American brokerage group, as a consortium led by JC Flowers, the investment fund, emerged as the frontrunner to buy a part of the business.

However, Man, which is understood to have expressed an initial interest in Refco's futures business, may be in line to scoop some of Refco's departing investment mandates - and staff - as the after-effects of an alleged securities fraud involving its chief executive reverberate around the world's financial markets.

Refco went into financial freefall last week after it disclosed that it accounts may have been used to mask a $430 million debt owed by Phillip Bennett, its chief executive. Mr Bennett has now been suspended and formally charged with allegations of securities fraud.

The group's unregulated broking arm was shut after running out of cash and faces imminent insolvency. But the regulated futures broking unit - of initial interest to Man Group and others - has attracted bids from a number of parties, including reportedly from a raft of private equity buyers.

Investment bank Goldman Sachs is running the auction of Refco, which sources say is becoming increasingly aggressive as the fate of the crisis-hit firm moves towards a firm conclusion.

In a statement to the stock market this morning, Man - which operates the highly successful Man Financial brokerage arm - denied any bid plans for Refco and moved to reassure investors about the size of its exposure to the group.

"Contrary to market speculation, Man Group confirms that it is not currently in discussions with Refco or its advisers regarding a Refco acquisition. Man can also confirm that the group has no direct financial exposure to Refco," Man said.

Man's withdrawal comes as JC Flowers, a New York based group run by former Goldman banker Chris Flowers, was reported to be in advanced talks to buy Refco's futures business.

As a regulated and ringfenced entity, Refco's futures arm should be insulated from the wider woes of the troubled business.

Mr Flowers worked for Goldman Sachs for more than 20 years until he left the bank in 1998. He set up JC Flowers two years later in 2000.

Other parties reported to be interested in bidding for parts of Refco today are Fimat, owned by French bank SocGen, and Wall Street investment banking giants Citigroup and JP Morgan.

Shares in Man added 4p to 1,545p this morning. The hedge fund manager has a market value of more than £4.6 billion.

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