A bankruptcy action filed late Wednesday by First International Trading Corp. apparently does not jeopardize the government's case against the San Francisco precious metals investment company, according to government attorneys.
The petition for reorganization under Chapter 11 of the federal Bankruptcy Code was filed in Nevada two weeks after federal regulators froze the company's assets and seized its records in connection with a complaint by the federal Commodity Futures Trading Commission that off-exchange futures contracts sold by the company were illegal.
"Filing for bankruptcy was an attempt to defeat the court-appointed receiver," Arthur Salzberg, western regional enforcement chief for the commission, said in a telephone interview. "The case is very complicated, but eventually all the legal actions will end up in the San Francisco court."
The company sold five-year deferred-delivery contracts for gold and silver through three offices in the San Francisco area, an office in Irvine and offices in Dallas and Houston.
Meanwhile, an attorney for FITC President Christopher Rubenstruck said Friday that the company has assets available to repay all its investors. Marvin Cahn, a San Francisco attorney, spoke Thursday with Rubenstruck, who "believes there are funds available to honor every contract," Cahn said in a telephone interview. But, Cahn said, the court orders freezing FITC's assets and appointing a temporary receiver to prevent the company from distributing any funds to investors.
So far, according to a preliminary audit by government investigators, it appears that FITC cannot repay an estimated 2,500 investors across the country. The audit shows that FITC apparently sold about $22 million worth of contracts, and to date, only about $2.3 million has been traced by the court-appointed receiver. The audit shows that FITC sold about $113 million worth of futures contracts, primarily for silver.