It's not even close to the last chapter for Escala (OTC BB: ESCL.PK)-- there's still the criminal trials to go through, and perhaps ultimately bankruptcy -- but it's another sad development in the stamp-and-coin-trading outfit's dramatic history.

Escala was once the main supplier and primary beneficiary of the world's third-largest auction house. Today, it's a shell of its former self: its reputation tattered, its profits gone, and its parent company, auction house Afinsa Bienes Tangibles, raided by Spanish authorities. The principals in the company are gone or indicted, and it's left once again as a parochial trading company with little hope of recovery.

Yesterday, as the markets closed, Escala announced that the other shoe in the stamp pyramid scheme was beginning to drop. For the first time, individuals directly affiliated with Escala have been indicted. Both its former chief corporate strategy officer (and former chairman of the board) and the president of European operations were indicted by Spanish authorities, along with eight other individuals associated with Afinsa.

Afinsa was the No. 3 auction house behind Christie's and Sothebys (NYSE:BID), yet it stands accused of a con game that bilked as many as 350,000 Spanish investors in a stamp-investing scheme. Afinsa would buy stamps from Escala at inflated prices, then mark them up for sale to investors. Afinsa was said to have overvalued the stamps by as much as 1,000% between 2000 and 2002.

Investors were promised rates of return as high as 10%, but the company was never able to generate those types of returns. It had to rely upon enticing more and more people to invest. Afinsa held onto the stamps and gave investors post-dated checks that included their gains. At the end of the investment period, people could take the money or invest in more stamps. The scheme imploded when Spanish authorities raided the offices of Afinsa and another Spanish auction house, Forum Filatelico. Escala, which was 67% owned by Afinsa, saw its stock drop by more than 70% on the day of the raid.

After months of denial that Escala had been involved in Afinsa's scheme, the compay released the results of an internal investigation that allegedly cleared all Escala executives of any wrongdoing. However, most of the company's top echelon left just prior to the release. Both the chief strategy officer and the European operations president were still on the company's payroll as consultants until the day before the Spanish court announced the indictments, at which time they were summarily terminated. Escala proudly announced that not one executive associated with the company at the time of the raids on Afinsa was still with the company. That's strange pronouncement when you've previously cleared everyone of wrongdoing.

With Afinsa bankrupt and a direct link now established between it and Escala, the probability of the latter's assets being seized to repay Spanish investors defrauded by the scheme seems increasingly likely. It's been the faint hope of those still holding shares of the delisted stock -- Nasdaq finally got around to enforcing its threat, after numerous extensions -- that the company would be able to salvage some value as a continuing enterprise. That possibility seems dimmer now.

As investigators pore through Afinsa and Escala's books, don't be surprised to see more former Escala executives put in the dock. I suspect the shoes haven't finished dropping yet.

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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.