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Investors will recover less than half of what they put into a collection of Northern California apartment buildings, office parks and other real estate without realizing the business that owned them was running as a Ponzi scheme, according to bankruptcy professionals who took it over after its founder’s death, WSJ Pro Bankruptcy reported. The management of Professional Financial Investors Inc. filed court papers on Sunday outlining a chapter 11 plan that proposes to sell or operate properties and pursue lawsuits to recover as much as possible for creditors owed more than $675 million. The bankruptcy professionals want the U.S. Bankruptcy Court in San Francisco to aid the cleanup process by making a formal declaration that Professional Financial was a Ponzi scheme as far back as 2007. The company owes at least $237 million to individuals who bought debt instruments it issued, and they aren’t the only creditors. JPMorgan Chase & Co. and other bank lenders are first in line to be repaid, secured by top priority on deeds of trust at dozens of properties. Other investors can expect to recover from 35% to 50% of the money they put into Professional Financial, according to court papers. The chapter 11 plan is backed by formal and informal groups of investors who have been on the scene since July 2020, when the business began to fall apart after the death of its founder, Kenneth Casey.

The founders of medical testing company uBiome Inc. were criminally charged with a $60 million fraud in an alleged scheme that reads like a smaller-scale, lower-profile version of the spectacular collapse of Theranos Inc., Bloomberg News reported. Criminal and civil cases were filed yesterday in San Francisco federal court against Jessica Richman and Zachary Apte by federal prosecutors and the U.S. Securities and Exchange Commission. The company sold products that allowed consumers and patients to analyze the DNA of their own microbiomes from fecal samples. Ubiome filed for bankruptcy in September 2019, about four months after the Federal Bureau of Investigation began investing its billing practices. Among its creditors were high-profile venture capital firms 8VC and Andreessen Horowitz. The cases echo the criminal charges pending against Theranos Inc. founder Elizabeth Holmes and her onetime boyfriend and former Theranos President Ramesh Balwani, although uBiome in one series of fundraising was valued at $600 million, compared with $9 billion for Theranos at its height. Both sets of defendants are charged with telling investors their companies could perform reliable medical tests when, according to prosecutors, they couldn’t. Also similar to Holmes and Balwani, Richman and Apte worked closely together and were romantically involved.

Creditors of cryptocurrency platform Cred Inc. called for the arrest of a former executive identified in court papers as a U.K. fugitive, arguing he should do jail time unless he returns the bitcoin and other assets he allegedly took from the bankrupt company, WSJ Pro Bankruptcy reported. A committee of unsecured creditors on Monday petitioned the U.S. Bankruptcy Court in Wilmington, Del. to hold James Alexander, Cred’s former chief capital officer, in civil contempt for violating an earlier bankruptcy court directive and to issue a warrant for his arrest. Cred and its unsecured creditors, which include cryptocurrency holders, have alleged during the bankruptcy that Mr. Alexander misappropriated at least 225 bitcoin, now valued at roughly $12 million, while he worked at the company. Alexander has returned roughly 50 bitcoin and $2.8 million in proceeds from liquidated bitcoin, according to the findings of an independent, court-appointed examiner last week.

The Department of Justice’s U.S. Trustee Program (USTP) has entered into a settlement with national consumer bankruptcy law firm Deighan Law LLC, previously known as Law Solutions Chicago and doing business as UpRight Law (UpRight), according to a press release. The settlement is set forth in a consent order entered by the Bankruptcy Court for the District of Montana on March 9 and resolves enforcement actions filed by the USTP over allegations of misconduct relating to UpRight’s representation of Montana consumers as debtors or prospective debtors in bankruptcy cases. As stipulated in the settlement, UpRight has paid or will pay more than $300,000 in monetary relief and will be barred from representing bankruptcy clients in Montana for six years. As a result of dozens of USTP actions filed since 2016, UpRight has paid or been ordered to pay almost $900,000 in monetary relief, including returning fees to over 500 impacted consumers and paying court-ordered sanctions, attorney’s fees, and costs. Additionally, bankruptcy courts have imposed practice bans against UpRight in at least four jurisdictions.

Cryptocurrency investment platform Cred Inc. unwittingly put a convicted financial criminal identified by the U.K. as a fugitive in charge of raising and deploying the firm’s capital before its collapse into bankruptcy, a court-appointed examiner said, the Wall Street Journal reported. An examiner’s report filed Monday in the U.S. Bankruptcy Court in Wilmington, Del., said that Cred failed to keep reliable records, properly track customer funds, perform due diligence on the firm’s investments or uncover the “extremely worrisome past” of former Chief Capital Officer James Alexander, who was fired last June. The firm’s collapse into bankruptcy was largely due to a “dereliction in corporate responsibility,” examiner Robert Stark said in his 99-page report. Failures included “chaotic and, in some instances, nonexistent diligence, accounting and compliance functions,” according to the report. Cred in bankruptcy filings has blamed Mr. Alexander for some of its financial troubles, accusing him of making off with bitcoin valued at millions of dollars.

Chemours Co.’s directors were accused in a lawsuit of duping shareholders about its financial health and the extent of its legal liability at the time it was spun off from a predecessor of DuPont de Nemours Inc., Bloomberg News reported. When the former E.I. DuPont & Co. officials spun Chemours off in 2015, they saddled the ex-unit with more than $2.5 billion liability over environmental harm and health risks from a class of chemicals known as PFAS, an amount that left the firm insolvent at its inception, Robert Pinto, a Chemours investor, said in a Delaware Chancery Court suit unsealed Thursday. Chemours directors covered up the company’s financial woes over a four-year period by approving dividends and making stock repurchases as part of an effort to persuade the market that the firm reshaped itself into a viable entity, Pinto said. The directors didn’t acknowledge until May 2019 the company hadn’t “transformed itself from being on the brink of insolvency,” and its liabilities were crushing, according to the 111-page complaint. “Any stockholder with candid reporting from the board would have rushed to sell his or her shares rather than continue sitting on a financial time bomb.”

A tsunami of fraudulent unemployment claims sweeping the nation has cost states and the federal government tens of billions of dollars in payments, many to overseas crime syndicates and nefarious hackers who have gained access to Americans’ Social Security numbers and other identifying information, The Hill reported. The scope of the crisis is not yet known, though the early estimates are eye-popping: California officials have identified at least $11.4 billion in fraudulent claims, and they suspect another $20 billion may be fraudulent. New York officials have referred more than 400,000 fraudulent claims to federal investigators, totaling $5.5 billion in claims, most of which were caught before they were paid. In Ohio, more than 100,000 people have reported potential fraudulent activity in their names to the Ohio Department of Job and Family Services. Ohio and Michigan officials each estimated the potential fraud cost their states hundreds of millions of dollars. Colorado’s Department of Labor and Employment has flagged more than a million applications for benefits as potential fraud. Maryland has identified a quarter million phony claims. Massachusetts reported last year it had paid out $242 million in improper claims.

GPB Capital Holdings LLC, the private-equity firm at the center of an alleged $1.7 billion Ponzi-like scheme to deceive investors, agreed late Thursday to have an independent monitor oversee the firm’s operations, the Wall Street Journal reported. The Securities and Exchange Commission made an emergency request for a monitor on Monday, to protect the capital of some 17,000 investors in four of the firm’s funds. A hearing on the request was set for Friday morning in the U.S. District Court for the Eastern District of New York in Brooklyn. The monitor has the authority to block significant financial moves by the firm, which owns dozens of auto dealerships through its funds. The firm accepted the SEC’s proposal to install Joseph T. Gardemal III, a managing director with Alvarez & Marsal Holdings LLC in Washington, as the monitor. Set up in 2013 by David Gentile, Jeffry Schneider and Jeffrey Lash, the firm was hit with civil actions by seven states and the SEC last week, while the three men were indicted on criminal fraud charges. Gentile and Lash have entered not guilty pleas while Schneider is expected to enter a plea on the criminal charges on Friday. Gentile, who has denied the civil as well as criminal charges, stepped down as the firm’s chief executive last Friday until the matters are resolved.