Refco's Bennett Falls Hard

Updated from 3:09 p.m. EDT

In three short days, Phillip Bennett, the ousted CEO of embattled brokerage Refco(RFX Quote), has gone from Master of the Universe to criminal defendant in a fraud that has stunned Wall Street and ravaged the company's stock.

With lightning speed, federal prosecutors arrested Bennett and charged him Wednesday with orchestrating a brazen scheme to paper over hundreds of millions of dollars in sour debts at the New York company, which sold a $583 million initial offering to the public just two months ago.

In charging Bennett with one count of securities fraud, prosecutors alleged that the 57-year-old executive secreted more than $400 million in bad debts owed to Refco to a separate company he controlled. The debt -- run up by Refco customers over seven years and unlikely to be repaid -- showed up on Refco's balance sheet as a cleaned-up receivable, its connection to Bennett masked by accounting sleight-of-hand involving yet another unaffiliated party. ...