Gain again enters RefcoFX picture

As customers of the now-defunct RefcoFX.com consider lawsuits and settlements that might help them get some of their account holdings back, Gain Capital has entered the picture again.

In June, Gain agreed to buy the assets of RefcoFX, the currency trading arm of the bankrupt futures brokerage, but that deal fell through the cracks a month later when the two sides failed to reach a final purchase agreement. That sat fine with most RefcoFX customers, who claim the deal would have made it very difficult for them to get back all their assets.

However, after the deal crumbled, RefcoFX announced it was shutting down operations, leaving its customers with little choice but to sue Refco for whatever they could get. On Nov. 15, Gain agreed to purchase the customer list of RefcoFX, a deal already approved by the U.S. Bankruptcy Court. Gain will pay RefcoFX $750,000 for the list, which contains the name and information of about 15,000 accounts.

Gain will pay RefcoFX $100 for every customer with an account of more than $4,000 who opens an account with Gain (or its retail division, Forex.com), and will also pay a 1-percent maintenance fee based on the average account balance of customers who switch to Gain.

Refco officials say the monies will be used by RefcoFX to increase the payouts available to creditors of RefcoFX. Gain Capital outbid Saxobank for the right to the RefcoFX customer list. Saxobank had offered $500,000, and the two firms participated in an auction in early November. For the most part, the new deal with Gain has failed to create much excitement among RefcoFX customers.

“The deal doesn’t provide any incentives to RefcoFX customers to join Gain,” says Steve Purdo, who has about $40,000 tied up at RefcoFX. “Plus, considering the deal Gain offered last time, a lot of people have a low opinion of them. “It seems the big beneficiary of the deal is RefcoFX, and that doesn’t figure to help us very much.”

RefcoFX customers have been notified by lawyers about filing a claim to collect lost account holdings, but Purdo says the language of the suit is unclear and many questions abound about how much customers would actually get. “The consensus is that nobody would get more than $4,000, regardless of how big their account was,” he says.

“And none of us are really willing to get our own lawyers to clear things up because the cost involved with that might outweigh any potential settlement.

“Essentially, we’re still in limbo.”