Numerous bidders have now emerged for Refco's business

The move came as a US bankruptcy judge said he no longer believed the sale had to be rushed through as so many bidders had come forward.

Instead, Judge Robert Drain insisted Refco alter the terms of the deal.

His decision came as five new suitors joined the race for the firm driving the purchase price to near $858m.

Flowers' decision to withdraw from the bidding battle left US broker-dealer Interactive Brokers Group with the highest known offer on the table.

It raised its bid to around $858m after a group led by Dubai Investment Group entered the fray with an offer worth $828m.

Changes demanded

At the hearing in New York Judge Drain had insisted he would only approve the sale to Flowers if it sharply reduced its break-up fee.

The break-up fee had been a contentious issue, with many companies opposing its high price.

At the hearing several potential suitors raised objections to the sale process.

Under the terms for an auction put forward by Refco, interested buyers must offer cash and bid at least $25m more than the Flowers offer as well as a 2.8% break-up fee.

Hedge fund Man said in a court filing that it could be a potential bidder for all or part of the Refco unit - but the conditions imposed by Refco "significantly impeded" its ability to bid.

Marathon Asset Management, another possible suitor, aired the same objection warning that the process imposed "a significant financial penalty on the prospective bidders".

Refco's lawyer Gregory Milmoe had earlier urged the judge to back the swift sale to Flowers, warning that the company was at risk of eroding "to the point where we won't have anything to sell".

Mr Milmoe added that since last week customer accounts at the business in question had fallen to $3.4bn from $4.1bn.

Scandal

Refco was one of the biggest independent US companies providing liquidity to ensure traders are able to buy and sell contracts as recently as two weeks ago.

However, on 18 October the group filed for bankruptcy - a week charges were levelled against former boss Phillip Bennett.

He is accused of hiding the fact that Refco Capital Markets - an unregulated subsidiary he controlled - owed $430m to its parent company through a series of undisclosed transactions.

The $430m has since been repaid but the arrangement was not revealed at the time of Refco's flotation, calling the company's future into question.

Mr Bennett faces up to 20 years in jail if found guilty of securities fraud.