Refco’s former chairman and chief executive officer, Phillip R. Bennett, was arrested by authorities and charged with securities fraud just two days after the company said he concealed $430 million in unpaid debts.

U.S. prosecutors opposed bail for Mr. Bennett at a hearing in Manhattan federal court this afternoon, telling a judge that he posed a “flight risk” because he faces life in prison if he’s convicted. Assistant U.S. Attorney David Esseks said Mr. Bennett “has an enormous incentive to go.”

Mr. Bennett’s lawyer, Gary Naftalis, claimed there was “no justification” for his arrest. Mr. Esseks replied that Mr. Bennett, 57, was heard on tape Monday telling a colleague “he was going to Europe in 48 hours, and that’s what prompted us to act as quickly as we did.” Late in the day. U.S. Magistrate Douglas Eaton freed Mr. Bennett on home detention, ordering him to wear an electronic bracelet and post a $50 million bond, plus $5 million in cash.

Mr. Bennett and unnamed accomplices “hid from investors and regulators hundreds of millions of dollars that one of Bennett’s companies owed to Refco,” U.S. Attorney Michael Garcia said. Hiding the transactions may have helped Refco, the largest independent American futures broker, appear more financially sound as it and underwriters including Credit Suisse First Boston prepared for a $583 million initial public offering in August.

Since Refco’s disclosure on Monday, the shares have plummeted more than 60% to less than half the IPO price as the Securities and Exchange Commission opened an investigation and shareholders filed lawsuits.

Refco shares fell $3, or 22%, to $10.85 at the 4 p.m. close of New York Stock Exchange composite trading.

New York-based Refco said that it’s cooperating with the SEC, the NYSE, and the Commodity Futures Trading Commission. “We have no comment other than that we continue to cooperate with the authorities,” a Refco spokesman, Rob Solomon, said yesterday, following news of Mr. Bennett’s arrest.

As a condition of his release yesterday, Mr. Bennett had to pledge his home in Somerset County, N.J., and his Park Avenue apartment. At the bail hearing, Mr. Naftalis said that in the taped conversation about going to Europe, Mr. Bennett was referring to a “long-planned social trip” with business friends. He also said that Mr. Bennett repaid the $430 million he owed Refco by taking out a loan, which he secured by pledging all his shares of company stock. “This man bellied up to the bar and paid $430 million,” Mr. Naftalis said. “People don’t do that if they’re going to run away.”

The six-page criminal complaint announced yesterday lays out a scheme that the government alleges began at least as early as 2004 and continued through this month. According to U.S. officials, Mr. Bennett used loans of as much as $545 million to a customer to conceal debt owed to Refco by a separate company he controlled, Refco Group Holdings.

In one set of transactions described in the complaint, Mr. Bennett on February 23 lent the customer $335 million of Refco funds and set March 8 as the repayment date. The same day, the customer lent Refco Group Holdings $335 million at a higher interest rate. Refco Group Holdings, Mr. Bennett’s company, then reduced its debt to Refco by the same amount. The transactions were reversed after the end of each of Refco’s fiscal quarters so that Mr. Bennett, and not the customer, was listed as owing the money.

While the complaint doesn’t name the customer, investigators believe it’s Liberty Corner Capital, a Summit, N.J.-based hedge fund that did business with Refco, according to a government official involved in the probe.