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Jim Rogers' Funds Sue Refco

They say the brokerge diverted its assets in violation of instructions.

Investing guru Jim Rogers' main commodity funds are charging

Refco

(RFXCQ)

with "wrongfully and fraudulently'' handling $362 million of their assets.

In a lawsuit filed late Monday, the management company for Rogers' commodity-tracking index funds claims that Refco, which filed for Chapter 11 bankruptcy protection last week, deliberately failed to follow its instructions.

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The lawsuit, filed in conjunction with the bankruptcy proceeding, seeks the immediate return of the $362 million held by the Rogers Raw Materials Fund and the Rogers International Raw Materials Fund. The funds claims the assets should never have been included in the Refco bankruptcy filing.

When Refco filed for bankruptcy protection last week, it listed the two Rogers fund among its biggest unsecured creditors. The filing automatically put a freeze on any investor redemptions.

However, Beeland Management, the manager of the Rogers funds, contends that it would still be able to withdraw those assets if Refco had done as it instructed.

The Rogers fund says Refco was supposed to have deposited those assets into a segregated customer account at Refco LLC, the derivatives brokerage's futures business, which is not part of the bankruptcy filing. Instead, the money was put into accounts at Refco Capital Markets, the broker's offshore prime brokerage, which is covered by the bankruptcy filing.

"As a result of Refco's scheme to brazenly violate the funds' instructions and deceitfully divert the funds' assets to an insolvent, unregulated entity ... the funds have suffered and will suffer irreparable harm absent return of the assets,'' the lawsuit charges.

Last week, Beeland Management sent a letter to its investors informing them they probably will not be able to get their money out anytime soon.