Earlier this month, I talked about Refco's delinquent community, and about how many people were colluding. Everyone seemed to have a slice of the action that sent the company to the dogs. At the time, I quoted New York Times columnist Floyd Norris who made the excellent point that it could turn into a legal quagmire.

And now we're seeing the start of it.
Refco's trusts are now suing bankers and auditors for $2 billion, reports Bloomberg.

And it's a big one. Bank of America, Deutsche Bank AG and Credit Suisse Group, and the beancounters PricewaterhouseCoopers, Ernst & Young and Grant Thornton are all getting sued. And going by the report, they're ducking for cover.

Trustee Marc Kirschner summed it up neatly

"This conspiracy went on for seven years, and as it turned out, many of the most well-known names in law, finance and accounting were involved...The scheme could only have worked with this cadre of outside advisers."

This is a big one. It's going to be messy but if Kirschner pulls this one off, the fallout could be huge. And it won't just be because of the payout. It will send a signal to auditors, bankers and lawyers working with other dog companies to watch out.