Soon after Alfred A. Cohen was appointed as receiver for Adams & Co., creditors had sued the company demanding more than enough to exhaust the funds on hand. The court then declared the company insolvent and this allowed these funds to be administered for the benefit of all who had filed suit. Cohen was removed as receiver but at a meeting of the creditors Cohen, Richard Roman, and Edward Jones were elected assignees. Cohen, at the order of the court, transferred all assets under his control to the banking house of Palmer, Cook & Co. where Jones was a partner. Cohen then asked the court for permission to go New York for three months and left all the assets, books and papers of Adams & Co. in the hands of Palmer, Cook & Co. and Edward Jones, his co-assignee.
Lawsuits continued to be filed against the assets of Adams & Co. and now totaled far more than the funds in the safe at Palmer, Cook & Co. Delos Lake, the judge of the fourth district who had presided over these affairs and before whom all proceedings had taken place, resigned and John S. Hager was named to replace him. Hager took a different view of the situation and held that a bank could not go into insolvency. He therefore declared the Adams insolvency void, revoked the order granting Cohen his release as receiver, then removed Cohen as receiver and appointed Henry M. Naglee in his place. Naglee demanded the assets from Palmer, Cook & Co. who refused to give them up, saying they had a right to keep them for their own protection. They also said that the controversy over the receivership was designed to delay and then defeat creditors. When Cohen returned from New York he faced the same demands and replied in a similar manner.
Naglee filed suit against Cohen, Roman and Jones and obtained a court order against all of them for two hundred and sixty-nine thousand dollars, the amount of Adams & Co. assets they supposedly held. When they refused to pay they were cited for contempt. On January 5, 1856, Cohen, who had left his family in New York, made an attempt to leave California to see them. To avoid detection due to the continuing controversy he was embroiled in he hid in the hold of the steamship Uncle Sam soon bound for Nicaragua. But deputy sheriff John Harrison, warrant in hand, found Cohen, promptly arrested him and threw him into prison for disobeying a court order. Jones was also soon arrested and jailed.