Bankruptcy Judge Linda Riegle on Friday authorized the interim managers of failed USA Capital, a private lender that controls $962 million in assets, to make an initial payment of about $60 million to some investors.

The $60 million represents about 6 percent of the money invested with USA Capital, but the interim management team hopes to obtain approval at an Aug. 31 hearing to make regular monthly payments.

"It's a lot of money, but there's a lot more money to be distributed in the future," said Annette Jarvis, an attorney representing USA Capital and its interim managers.

USA Capital solicited investments from individuals interested in earning double-digit interest rates on loans secured by real estate. USA Capital had about 6,500 investors around the country when it filed for bankruptcy April 13.

The initial distribution will provide relief to retired investors who relied on USA Capital for virtually all of their income. Many of these investors are struggling to pay their home loans or rent, medical bills and other ongoing expenses.

Some investors bought fractional interests directly in short-term mortgage loans also known as trust deeds. Others invested in two trust deed funds managed by USA Capital.

The so-called direct lenders who own fractional interests in trust deeds will receive interest and principle payments that were received after the company filed for bankruptcy.

Also, about $1.6 million will be mailed to investors in the USA Capital First Trust Deed Fund, a mortgage loan pool regulated by the Securities and Exchange Commission.

However, individuals who put money in USA Capital Diversified Trust Fund, a separate fund lightly regulated by Nevada, will receive none of the initial distribution.

The Diversified fund held about $150 million in assets, but most of its loans are non-performing or not paying interest. Diversified is owed $108 million.

The loans were unsecured although the interim managers have obtained collateral in the form of partnership interests for some of the loans in the Diversified fund.

"Why is it our fund was looted, and the others weren't looted?" asked Marc Levinson, an attorney representing the committee for Diversified fund investors. "We ought not be the sole victim of the street crime."

Levinson said USA Capital was a "Ponzi-like scheme" at least as far back as 2001. In a Ponzi scheme, money fund from new investors is used to pay earlier investors.

He mentioned the 2001 foreclosure of a Sheraton hotel near a Salt Lake City airport, which the Diversified fund financed. USA Capital later sold the hotel, but only some of the sales proceeds were returned to the Diversified fund.

USA Capital's interim managers plan to start mailing checks to investors in about two weeks. "We can only distribute money that came in on loans that are now paying," Riegle said.

At a hearing on Aug. 16, the judge will consider whether to release another $9 million that was in the USA Capital collection account when it filed for bankruptcy.

The bankrupt private lender retains about $25 million in cash that may be kept or paid out later to investors with disputed claims.

The disputes arise out of the monthly payments that USA Capital was mailing to investors monthly before the bankruptcy filing although many of the loans were past-due. Riegle later will decide whether to deduct overpayment sums from distributions made to these investors.

The alternative is to pay investors who were overpaid by USA Capital and then allow those who were shortchanged to sue other investors.

"The argument is that you would have to sue. That is incredibly expensive, frustrating and, I think, an unnecessary legal position," Riegle said.