Sales Halted, FITC Files for Protection
Hours after a federal judge in San Francisco ordered First International Trading Corp. to stop selling its precious metals credit contracts and placed it in temporary receivership, the company filed for protection Wednesday under Chapter 11 of the U.S. Bankruptcy Code.
According to a preliminary audit by government investigators, the San Francisco-based company apparently sold about $113 million worth of illegal precious metals contracts and collected about $22 million from an estimated 2,500 customers across the country. So far, only about $2.3 million has been traced by the temporary receiver, according to sources close to the investigation.
Mark Hafer, the attorney who filed FITC’s bankruptcy petition in federal bankruptcy court in Las Vegas, said in a telephone interview that FITC has “substantial assets and substantial debts,” but he declined to elaborate. Hafer said he was aware of the orders issued by the U.S. District Judge Eugene Lynch in San Francisco.
FITC, incorporated in Nevada in 1983, operated three offices in the San Francisco Bay Area. It also had offices in Irvine, Dallas and Houston and employed about 180 account executives nationwide, according to the manager of the Irvine office.
On Feb. 14, Lynch issued an order freezing FITC’s assets and ordering its business records seized by government investigators working for the federal Commodity Futures Trading Commission.
The action taken against FITC is part of a yearlong state and federal crackdown on firms that sell precious metals to investors on credit, which officials claim is illegal for all but four firms that were engaged in the practice before a federal moratorium. According to court records, FITC was selling five-year deferred delivery contracts for gold and silver. The commission complaint alleges that the contracts amount to illegal futures contracts.
“Unfortunately, all the company appeared to be selling was promises, hopes and wishes,” said Arthur Salzberg, Western regional enforcement chief for the CFTC, in a telephone interview Wednesday.
