Niederhoffer's Second Act Has Plot Twist

The broker was Refco(RFXCQ), the once-giant commodities and derivatives firm that collapsed last October in an accounting scandal, allegedly engineered by former Refco CEO Phillip Bennett. Refco filed for bankruptcy shortly after it revealed that Bennett had been hiding hundreds of millions of dollars in old customer trading losses in a separate. Bennett allegedly hid the uncollectible debt in order to burnish Refco's books in advance of its August 2005 IPO.

TheStreet.com and other news organizations reported last fall that some of the trading losses Bennett was hiding may have included debts that Refco couldn't collect from Niederhoffer's fund. But Niederhoffer has denied the allegation, saying his firm and Refco resolved all their claims a long time ago.

Before the 1997 market plunge, Niederhoffer was considered one of Wall Street's top hedge fund managers -- at least to himself. In 1996, he published an autobiography, The Education of a Speculator, in which talked about his success as a rough-and-tumble trader with much bravado.

Niederhoffer clearly hasn't lost his swagger. Despite Matador's lousy May performance, the hedge fund manager says he's not about to change his investing style. He says there's only one way to make money on Wall Street: taking risks.

"Regrettably, I don't know how to make money without risk,'' says Niederhoffer in his email response. "If I ever do learn, my customers and I presumably will be much wealthier. I don't expect to learn.''

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