Commodities Firm Is Placed in Receivership

A federal court judge Thursday placed a Huntington Beach commodities company in receivership at the request of the Commodity Futures Trading Commission.

U.S. District Judge Irving Hill ruled that the company, U.S.A. Commodity Futures Inc., had become insolvent and appointed a receiver to make an accounting of the firm’s assets and liabilities, according to Arthur Salzberg, regional counsel for the CFTC.

The receiver, Century City attorney Sheldon Jaffee, was instructed to report Jan. 6 as to whether he believes the firm can be salvaged with an infusion of additional capital or should be liquidated.

Earlier this week, another U.S. district judge, Richard Gadbois, issued a temporary restraining order against U.S.A. Commodity Futures and froze the company’s bank accounts after the CFTC complained that the firm had a $108,000 gap between assets and the amount owed its customers.

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