Brazil Orders Stock, Options Markets to Close for One Day

Brazilian authorities Monday ordered all stock and options markets shut for one day to sort out the chaos caused when checks written by a major brokerage house bounced.

The refusal of the banks to honor an 11 million new cruzado ($8.8 million) check written last week by Lebanese-born Naji Nahas to a brokerage company, Ney Carvalho, has plunged stock exchanges into disarray.

The Rio exchange said in a telex late Monday that a total of seven brokerage houses had debts at the close of business Thursday, when the Nahas check was cashed.

Nahas, educated in Egypt and London but now a Brazilian citizen, was charged by the U.S. Commodity Futures Trading Commission in 1985 with illegally manipulating silver prices in 1979 and 1980 together with the Hunt brothers.

He was accused of helping coordinate silver purchases in a bid to corner the silver market sparking a five-fold price jump to a record $50 per ounce in early 1980. In 1986, Nahas was fined $250,000 by the CFTC for his role in the alleged manipulation scheme.

A stock exchange official said that four firms had been reported on Monday night to the Central Bank for failing to pay their debts. The central bank would decide whether to close them or impose other penalties.

Exchange sources said the debts in the four companies so far reported to the central bank totalled around 20 million new cruzados ($16 million).

But the final total of money involved was believed to be higher, perhaps as much as 200 million cruzados ($160 million), they said.