GOLDMAN SACHS, the investment bank, will this weekend start a fire sale of the assets of Refco, the disgraced futures trader, as regulators attempt to stem widespread panic in financial markets.

If buyers are not found within days the entire firm, including its profitable Chicago operation, could collapse. Refco’s share price went into freefall last week after the revelation that British-born chairman Phillip Bennett had siphoned $430m (£243m) into a secret hedge fund.

One potential buyer said: “This firm could vaporise within days. The only bits worth buying are its regulated businesses, but we don’t have time to carry out due diligence.” The group has a regulatory asset base that stands at between $400m and $500m. This is the capital it is required to deposit to ensure it can trade.

The Refco collapse will force Man, the UK-based hedge-fund manager, to postpone plans to spin off its brokerage business, Man Financial. Man had looked closely at the demerger after the huge price achieved by Refco at its flotation in August. The Man spin-off would have given about £1 billion back to shareholders.

On Friday Refco, which until last week was one of the largest commodities and futures brokers in the world, announced it had closed its securities business. The closure follows the suspension of its capital-markets division on Thursday owing to lack of cash, leaving only its Chicago futures common merchant operating normally.

Regulators have asked Goldman and other firms to buy or assume financial responsibility for Refco’s huge futures-trading operation. Goldman, along with Credit Suisse First Boston and Bank of America, underwrote Refco’s float and was brought in by the company last week to assess its position. It is thought not to be keen to take on the firm’s liabilities.

Thomas H Lee, the American venture capitalist that paid $450m for its majority stake in Refco in June, was first alerted to the problems by someone in the company’s control division. Lee’s paper loss since the float is now more than $1 billion. One banker said Lee could buy parts of the Refco business and merge it with Currenex, the foreign-exchange platform.

A source close to Lee said: “The firm certainly feels misled. We are talking about very sophisticated investors. Why didn’t anyone at Grant Thornton (Refco’s accountant) know about what was going on, or anyone who had been involved in running due diligence.”

In March, Refco was managing $4.1 billion in customer futures accounts, rivalling the derivatives desks of some big Wall Street banks.

Bennett is on indefinite leave and federal prosecutors have charged him with fraud in connection with the firm’s initial public offering.

Michael Greenberger of the University of Maryland said Refco could be the harbinger of a far bigger problem. Greenberger, a former Justice Department lawyer and director of the Commodity Futures Trading Commission, said: “My fear is that Refco is the canary singing in the mine. I hope I’m wrong.”

He added: “There is a potential 100-year storm in the market. The risks people were willing to accept were not normal everyday risks.”

The recent collapse of Bayou, a New York hedge fund, and now Refco could well be signs of a far wider problem. Refco’s collapse will trigger a wave of litigation involving some of the biggest names in world finance.

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