Court Order Halts Trading by Commodities Company

A Huntington Beach commodities company was ordered to stop doing business Tuesday by a federal court judge in Los Angeles.

At the request of the Commodity Futures Trading Commission, U. S. District Judge Richard Gadbois issued a temporary restraining order against U.S.A. Commodity Futures Inc. and froze the company’s bank accounts.

According to a complaint filed Monday by the commission, U.S.A. Commodity experienced a $108,000 shortfall of funds needed to meet its customer obligations.

As of Dec. 19, the company had $238,604 in assets and $355,602 in liabilities, according to court records.

The firm’s troubles began when a large customer was unable to cover a margin call, according to Marvin Lager, U.S.A. Commodity’s attorney. Margin calls require an investor to put up additional collateral to back up the loans he hastaken out to buy commodities or securities. Drexel Burnham Lambert Inc., the New York securities firm through which U.S.A. Commodities cleared its trades, subsequently liquidated all the customer accounts.

“Just because a customer bounced a check (and could not cover the margin call) doesn’t mean this is a bad company that should be put out of business,” Lager said.

Still, the company also allegedly failed to properly segregate customer funds and did not keep adequate books and records, according to Arthur Salzberg, regional counsel for the Commodity Futures Trading Commission.

Gadbois transferred the case to Judge Irving Hill and scheduled a hearing for Thursday to determine whether a receiver should be appointed.