PHILLIP BENNETT could face up to 75 years in jail after the British former Refco chief was last night indicted on charges of conspiracy to commit securities fraud, wire fraud and making false statements.

The indictment, filed in New York, came just hours after Man Financial, the London based brokerage, bought Refco’s futures trading business for $323 million (£186 million), beating the closest competition in the auction by more than $100 million.

Mr Bennett, who denies the charges, was arrested last month as it was alleged that he had hidden $430 million of Refco debt using a private company under his control called RGHI.

The indictment claims that the debt was concealed using a series of multimillion-dollar loans in a conspiracy with at least one of Refco’s clients.

On February 20, 2004, Refco Capital Markets, a Bermuda- based firm, loaned $720 million to a Refco client, it is alleged. The client then loaned the money to RGHI, charging 75 basis points of interest to make a profit along the way.

Mr Bennett wrote a letter of guarantee to the client, who was not identified in the indictment, claiming that if RGHI defaulted on repaying the loan, Refco would pay it back. RGHI then loaned the money to Refco to plug a hole in its accounts accrued years earlier when a handful of clients lost hundreds of millions of dollars trading on account during the Asian financial crisis. The indictment does not explain why Refco and Mr Bennett decided to take on those client debts into Refco’s books. A number of other similar loan schemes for $345 million, $450 million and $420 million are also listed in the indictment.

Separately, Man Group was declared the victor in the complex auction of the most valuable Refco assets after a heated process that dragged on until 7.30 yesterday morning in New York.

The company paid $282 million in cash while taking on liabilities and other considerations of a further $41 million. But Man could yet reduce the price it pays for the Refco assets depending on how many customers remain at the futures trading business once the deal is finalised.

Cerberus Capital Management, the giant hedge fund controlled by Steve Feinberg, and Man Group, the world’s biggest publicly traded hedge fund, were the last two left at the negotiating table yesterday morning. It is understood that Cerberus was willing to pay around $200 million for the Refco assets, compared with Man’s total $323 million.

On Wednesday evening the Refco futures arm, Refco LLC, filed for Chapter 7 bankruptcy protection in New York, lowering the price dramatically. Until then the four main bidders at the table had been expected to pay between $1 billion and $1.2 billion for the business. But $745 million of that sum was to account for funds Refco LLC was required to hold in its coffers to meet regulatory requirements. The regulatory funds were taken out of the equation after the bankruptcy filing.

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