updated 10/13/2005 3:42:42 PM ET 2005-10-13T19:42:42

Refco Inc., the commodities broker mired in an accounting scandal which finds its chief executive accused of hiding bad debts from shareholders and regulators, said Thursday it will freeze customers' accounts in one of its unregulated subsidiaries for 15 days because the unit may not have enough cash on hand to operate normally.

While Refco said its regulated businesses have enough money to continue normal operations, a major credit rating agency warned there was "substantial doubt" about the entire company's liquidity.

Refco Capital Markets Ltd., an unregulated offshore broker for stocks, bonds and currencies, is the subsidiary that former CEO Phillip Bennett, 57, allegedly used to help hide up to $545 million in bad debts. Bennett was indicted on federal charges Wednesday that he caused Refco to file fraudulent statements to securities regulators. He is free on a $50 million bond.

In a statement, Refco said it would put a 15-day moratorium on all of the unit's transactions — effectively preventing customers from withdrawing money from their accounts — "to protect the value of the enterprise."

A spokesman for Refco did not immediately know how many accounts or how much money would be frozen. While Refco's regulatory filings do not list revenues from each subsidiary, the company's statement said Refco Capital Markets "represents a material portion of the business of the company."

Other subsidiaries have enough liquidity to remain operating normally, the company said. Those regulated subsidiaries deal in futures commissions, derivatives and commodities.

Shares of Refco fell $2.95, or 27 percent, to $7.90 on the New York Stock Exchange before they were halted prior to the company's announcement. The NYSE announced that the halt would continue while it evaluates whether the company needs to make further disclosures or even if it can continue to be listed on the Big Board.

Refco's bond and credit ratings suffered new downgrades on the news. "Standard & Poor's believes that there is substantial doubt concerning the liquidity of Refco," the credit rating agency said in a statement. S&P lowered Refco's counterparty credit rating from B-plus to B-minus, while Refco's own corporate bonds were lowered from B-minus to CCC. All of the ratings put Refco's debt firmly within "junk" status, considered to be speculative and more likely to default.

The capital markets subsidiary is at the center of the accounting troubles at Refco. Bennett is accused of moving uncollectable debts in and out of that subsidiary, and other entities, to hide the fact that the company was counting debts as revenues, even though it realistically was unlikely to collect on those debts.

Refco announced the irregularities on Monday, placing Bennett on leave after he repaid $430 million with interest to the company. Santo Maggio, head of Refco Capital Markets Ltd. and Refco Securities LLC, also was placed on leave.

In its statement, Standard & Poor's noted that the money Bennett repaid the company might not immediately be available. Bennett's lawyer said Wednesday the former CEO obtained the money through a bank loan secured by his Refco stock.

The company first went public in August, and federal prosecutors said Bennett's alleged transactions hid the true value of the company from investors, who have seen their shares tumble from more than $28 per share at Friday's close.

The company has said that its earnings reports dating back to 2002 are unreliable.

The company also said it has retained former Securities and Exchange Commission Chairman Arthur Levitt and Eugene Ludwig, CEO of Promontory Financial Group LLC, as special advisers to the board of directors.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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