Trusts sue Refco advisers for $500 million

(Adds details on lawsuit, comments from defendants and background of other suits)

NEW YORK, Aug 27 (Reuters) - Trusts representing Refco Inc. creditors said on Monday they had sued the now defunct futures and commodities broker's legal and accounting advisers for more than $500 million on behalf of 75 foreign exchange customers.

The Refco Litigation Trusts said the lawsuit filed in New York State Supreme Court is against accounting firms Ernst & Young LLP [ERNY.UL] and Grant Thornton, law firm Mayer, Brown, Rowe & Maw LLP and Refco insiders.

The lawsuit alleges that Refco insiders, with the help of advisers, induced forex customers to entrust their funds with the Refco Capital Markets broker-dealer.

They then used the customers' assets as a "personal piggy bank" to fund other Refco businesses, the trusts allege.

Mayer Brown and Grant Thornton did not have immediate comments. An E&Y spokesman declined to comment, saying they had not seen the suit. Refco and 23 affiliates filed for Chapter 11 bankruptcy on Oct. 17, 2005, a week after revealing that former Chief Executive Philip Bennett hid $430 million of debt. The company had gone public two months earlier and later liquidated its operations.

The lawsuit is the latest in a series of cases stemming from Refco's collapse, and the third case filed by the trusts.

The trusts have a broad mandate to pursue claims on behalf of Refco and its creditors, and intend to bring additional lawsuits, Marc Kirschner, the trustee, said.

They have been bringing suits on behalf of various entities to maximize recoveries for creditors.

Last week the trusts sued several banks and accounting firms, including the companies mentioned in the latest lawsuit, for more than $2 billion. And earlier this month, they sued Thomas H. Lee Partners LP [THL.UL] over its alleged role in the collapse.

The trusts have a deadline of Oct. 16 to bring its cases.

Bennett, former Refco Chief Financial Officer Robert Trosten and former Refco President Tone Grant are also awaiting trial on conspiracy, fraud and other charges.

((Reporting by Paritosh Bansal, editing by Christian Wiessner; +1-212-393-9461; paritosh.bansal@reuters.com)) Keywords: REFCO TRUSTS/SUIT

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