--- title: "Receivables factoring and supply-chain finance at First Brands" language: en canonical: https://dossiertwist.com/dossiers/first-brands-group/factoring-and-supply-chain-finance/ as_of: 2026-10-15 keywords: ["First Brands Group","Patrick James","Edward James","First Brands Group Holdings","Viceroy Private Capital","Carnaby Capital Holdings","Onset Financial","Point Bonita Capital","Jefferies","Raistone","Katsumi Global","Horizon Global","Brake Parts Inc","Ultinon","Trico","FRAM","Chapter 11","receivables factoring","off-balance-sheet financing","supply chain finance"] --- # Receivables factoring and supply-chain finance at First Brands **Question.** How did First Brands use factoring and supply-chain finance, and what is alleged about those programmes? **Answer.** First Brands sold customer receivables in two ways: to financial institutions partnering with its large retail customers, and to unaffiliated factors that First Brands itself repaid about 105 days later. The debtors put the unpaid balance of that third-party factoring at about $2.3 billion at the Chapter 11 petition, and supply-chain-finance claims head the list of the largest unsecured creditors. The estate's complaint and the January 2026 indictment allege fake, inflated and double-pledged invoices; Patrick James and Edward James pleaded not guilty. Factoring counterparties including Katsumi, Jefferies' Leucadia and Evolution Credit Partners are listed with disputed claims, the bankruptcy court held that Evolution had no perfected security interest in non-purchased receivables ranking ahead of the debtor-in-possession lenders, and the debtors' expert argued that some factors should have known of the irregularities, an assessment no court has decided. ## How the two factoring programmes worked - Analysis: The debtors' first-day declaration (Docket No. 22 in case 25-90399) describes two kinds of receivables factoring. Under Customer Factoring, First Brands sold receivables owed by large retail customers, which had payment terms of up to 365 days, to financial institutions that partnered with those customers; it was paid in the near term, often within 30 days, and the customer could later pay the institution directly. Under Third-Party Factoring, it sold receivables to unaffiliated factors that paid it in the near term, sometimes within seven days, in exchange for a payment about 105 days later that First Brands itself, not the customer, had to make to the factor. [src-001] - Analysis: In practice First Brands kept servicing the receivables it had sold to Third-Party Factors: according to the debtors' December 1, 2025 motion for factoring procedures (Docket No. 807), the customer paid First Brands when a receivable fell due and First Brands then passed the amount to the factor. After diligence by the company's advisers, the debtors believed that an unpaid prepetition balance of about $2.3 billion had accrued under these arrangements by the petition date. The Special Committee was investigating whether receivables had been turned over to the factors when received and whether some had been factored more than once, and the debtors said they would segregate funds received on receivables factored before the petition. Testifying on November 10, 2025, interim chief executive Charles Moore said the parties receiving these payments were third-party factors rather than lenders, that in a normal factoring arrangement they would not be creditors of the company, and that this was one of the red flags. [src-026] [src-074] [src-001] [src-098] - Analysis: Lawyers for Patrick James argued, in a December 2025 motion to dismiss and a later petition against Jefferies in New York, that because First Brands kept servicing the receivables the factors in substance became lenders extending unsecured loans at high interest rates, for example in the mid-teens; the December filing also noted the debtors' announcement of December 1, 2025 that possibly $150 million relating to certain supposed Third-Party Factoring was being retained by customers. The debtors' side described the counterparties as purchasers of receivables rather than lenders, and no court has ruled on the characterisation in the retained record. The New York petition also quoted a press report that Raistone's chief executive had told a trade-finance conference that a lot of people had made a lot of money over many years on First Brands, and used the remark to argue that financiers earned high yields; the remark does not establish any party's knowledge of irregularities. [src-049] [src-026] ## Who financed the receivables and payables - Analysis: The consolidated list of the 30 largest unsecured creditors filed with the Chapter 11 petition is headed by supply-chain-finance claims: HFS ($233,707,424.12), Trade Finance Company ($208,261,460.18) and 1977 O'Connor ($116,072,544.90), each listing a Raistone sales director as its contact, followed by The CIT Group ($84,370,311.72). Further supply-chain-finance creditors on the list include Napier, Wafra, Pemberton Capital Advisors, IVY, Fasanara, Southstate Bank, Orbian Management and Nomura; most of the remaining entries are trade payables owed to suppliers. The same list names four factoring counterparties with contingent, unliquidated and disputed claims in undetermined amounts: Evolution Credit Partners, Katsumi Global, LLC and Leucadia Asset Management – Trade Finance Group (Jefferies) under factoring agreements, and Raistone under factoring agreements and supply chain finance. [src-002] - Analysis: The bankruptcy docket shows a wider circle of financiers appearing as creditors: Raistone Capital and two Raistone Purchasing series, Evolution Credit Partners, Katsumi Servicing, FactoFrance, ING Belgium, Mitsubishi HC Capital America, Arab Banking Corporation, Onset Financial, equipment and vehicle financiers, STORE Capital entities and the Pension Benefit Guaranty Corporation, as well as banks and lenders including Bank of America, UMB Bank, Wilmington Savings Fund Society, U.S. Bank, Truist Bank, First Guaranty Bank, Planters Bank, Napier Park Global Capital and Silver Point Capital. The docket also lists the Official Committee of Unsecured Creditors, an Ad Hoc Group of Lenders, Aequum Capital Financial II as an interested party, Martin De Luca as examiner and BDO USA, P.C. as auditor. [src-040] - Analysis: A press investigation based on documents and interviews reported that O'Connor, the Chicago-based hedge fund unit of UBS, bought a stake in Raistone, the technology platform that provided supply chain financing to First Brands, and also invested directly in First Brands' invoices, as did a joint venture of Mitsui & Co. and Norinchukin Bank. According to the same report, Raistone and Jefferies' Point Bonita fund said before the bankruptcy that the risk lay mainly with the blue-chip customers named on the invoices, but revealed afterwards that they had never received funds from those customers directly: the money had come back to them through First Brands. These are press findings, not findings of a court. [src-086] ## Raistone's examiner motion and the Katsumi invoices - Analysis: On October 8, 2025 Raistone, which had worked on financing deals for First Brands, asked the bankruptcy court to appoint an independent examiner, alleging that as much as $2.3 billion had "simply vanished" and calling the board's own investigation woefully insufficient, according to press reports of the motion. In support it filed an October 2, 2025 email exchange in which a restructuring lawyer for First Brands at Weil, Gotshal & Manges, asked whether First Brands had actually received an estimated $1.9 billion and how much was in the segregated accounts for factored receivables, answered "We don't know" and "$0". First Brands had said that an independent board committee was investigating its use of off-balance-sheet financing. The U.S. Trustee also sought an examiner on October 15, 2025, and on November 19, 2025 the court ordered the appointment of one. [src-073] [src-074] - Analysis: Katsumi Global, LLC, described in press reports as a joint venture of Norinchukin Bank and the Japanese trading house Mitsui & Co., said through a lawyer in October 2025 that it had $1.75 billion of exposure to First Brands. The estate's adversary complaint of November 3, 2025 gives an example of an altered invoice: on May 9, 2025 Brake Parts Inc. LLC sold automotive parts to General Motors for $179.84, and on May 19, 2025 the same invoice, among thousands of others, appeared at $9,271.25 on a list nominated for factoring to Katsumi (doing business as Ja Mitsui Capital America). According to the complaint, Katsumi paid about $11.18 million for a package of invoices worth only about $2.3 million, an allegation interim chief executive Charles Moore repeated in a November 2025 court filing. These allegations have not been adjudicated. Patrick James's motion to dismiss of December 15, 2025 argues that the complaint does not connect James to the factoring and cites hearing testimony that some invoices in the nomination packets were unchanged or lower and that a Katsumi representative had updated the schedule Moore testified about; James's lawyers also said the debtors' advisers gave a one-sided account of the transactions. [src-003] [src-026] [src-092] - Analysis: In a July 2026 declaration supporting the debtors' liquidation plan, their expert Marc Kirschner said that Katsumi bought $4.9 billion of factored invoices from First Brands starting in 2023, that a Katsumi audit in September 2023 found purchased receivables that were falsified, fabricated and inflated, in some cases by up to 180,000%, and that Katsumi told First Brands of the discrepancies but kept financing its receivables for two more years and sought to resell them. Kirschner said Katsumi was owed over $1.7 billion at the collapse and argued that it knew or should have known it was being paid on at least partly fraudulent invoices. This was a retained expert's litigation assessment, which objectors said rested on selected fragments of information, and no claim against Katsumi has been adjudicated. Katsumi opposed the plan with other creditors, and on August 24, 2026 the court denied confirmation as not feasible without assessing the merits of the expert's arguments. [src-070] [src-085] ## Jefferies, the Point Bonita fund and Leucadia - Analysis: Jefferies said that its Point Bonita trade-finance fund bought around $715 million of uncollected First Brands invoices. A press report quoted in Patrick James's motion to dismiss said that Leucadia, Jefferies' asset-management arm, had been buying First Brands' expected payments from retailers since 2019, had become one of its biggest financiers and received near-daily payments from First Brands for years as customers paid the invoices Point Bonita held; prosecutors later alleged that many of the invoices were faked or inflated. A petition by Patrick James and related companies to enforce a subpoena against Jefferies Financial Group in the Southern District of New York states that Jefferies also owns Leucadia Asset Management, Point Bonita Capital and three LAM Trade Finance Group entities. Jefferies' own description is narrower: its letter of October 12, 2025 calls Point Bonita a fund in which Jefferies is a 5.9% investor, with Leucadia Asset Management communicating with the fund's investors. [src-012] [src-026] [src-049] [src-027] - Analysis: In that published letter, Jefferies' chief executive and president said that First Brands sold receivables to Point Bonita under a Master Receivables Purchase Agreement with a fee letter, that the agreement had been listed for years on the schedules to First Brands' credit agreement with all its first-lien and second-lien lenders, that the fees went to the fund's investors, and that outside counsel for First Brands had opined they did not breach the credit agreement. Jefferies put its own investments at $43 million, or 5.9%, of Point Bonita's receivables purchased from First Brands, plus a $2 million interest in First Brands' bank loans through Jefferies Finance's Apex platform. It said nobody at Jefferies was aware of fraudulent activity at First Brands and that it learned of the fraud allegations when the public did, after First Brands stopped remitting to Point Bonita the cash collected on receivables the fund owned; Leucadia Asset Management had agreed with the fund's investors that they should redeem effective December 31, 2025, through four quarterly payments ending in October 2026. [src-027] - Analysis: In the bankruptcy, Leucadia Asset Management and its affiliated LAM Parties objected to the debtors' factoring procedures motion (Docket No. 1049), saying the debtors had admitted a massive fraud on them and other Third-Party Factors by acknowledging that many receivables sold were fake or inflated, so that hundreds of millions of dollars were taken from LAM alone and billions from the factors in total. That is a creditor's characterisation: the debtors' first-day declaration describes the factoring practices as under investigation, and Patrick James's counsel said Jefferies and its affiliates had not provided evidence for the allegations. On December 31, 2025 the court authorised a release of funds and adjourned the remaining factoring-procedures matters. [src-049] [src-074] - Analysis: The debtors' expert Marc Kirschner said in July 2026 that Leucadia Asset Management became suspicious of First Brands in 2023, sending questions about receivables and financing and asking for a call and an on-site visit with then chief financial officer Stephen Graham, a request Kirschner said was met with threats from Edward James; Kirschner argued that Leucadia should have been aware of potentially fraudulent activity from 2023 onwards. This assessment has not been adjudicated. Jefferies had said in October 2025 that nobody at Jefferies was aware of fraudulent activity at First Brands, and Leucadia Asset Management opposed the debtors' plan, which the court rejected on August 24, 2026 without assessing the expert's arguments. [src-085] [src-070] [src-027] - Analysis: Two further suits followed, both pending without a ruling in the retained record. In March 2026 Western Alliance said it was suing Jefferies Financial for not completing payment of $126.4 million owed on loans tied to First Brands and collateralised by receivables bought from First Brands. Jefferies replied that Western Alliance had not lent to Jefferies but had for over four years made non-recourse loans, without any Jefferies guarantee, to special purpose entities holding First Brands receivables, LAM Trade Finance Group and LAM TFG I SPV LLC, both owned by the Point Bonita master fund; it denied any obligation to repay and called the statement that it "couldn't" repay $126 million false and absurd. Separately, according to a March 2026 press report, investors in two British Virgin Islands funds sued over the Point Bonita fund, saying it had claimed cash dominion over receivables from First Brands while First Brands in fact kept control of them and may have used them to commit fraud; they sought $18.4 million in damages, and no response is recorded. [src-121] ## PrimeRevenue, the supply-chain-finance platform - Analysis: First Brands used the software platform of PrimeRevenue, a supply-chain-finance platform, in its financing arrangements, including by uploading receivables data to obtain finance from third-party lenders. In July 2026 the debtors' expert Marc Kirschner suggested litigation against PrimeRevenue, saying its employees had contacted First Brands in 2024 instructing it to check document properties before submitting files, which Kirschner argued showed PrimeRevenue knew the documents were written by First Brands employees rather than outside suppliers. The assessment has not been adjudicated; PrimeRevenue says the statements came from a third party who interviewed an employee, which a creditor's counsel called hearsay within hearsay. PrimeRevenue said the court did not consider any evidence about it in the plan ruling, that its platform connected the debtors with supply-chain-finance providers who paid each other directly without funds passing through PrimeRevenue, and that it is not a transferee of any potential fraudulent transfers. [src-070] [src-071] - Analysis: In early September 2026 PrimeRevenue, by its own account, asked the bankruptcy court to strike or seal the statements about it in the First Brands record, calling them scandalous and defamatory, saying they harmed its credibility with lending partners, that the interim chief executive and the debtors' counsel had not conducted reasonable diligence into its business, and that the declarations of Kirschner and Moore had been ruled inadmissible. As of September 9, 2026 the court had not ruled on the motion. [src-071] ## What the estate, prosecutors and a former finance executive allege - Analysis: The estate's adversary complaint of November 3, 2025 alleges that Patrick James caused First Brands to incur at least $2.3 billion of receivables-factoring liabilities based, at least in significant part, on non-existent or doctored invoices, and engaged in financing through special purpose vehicles that incurred at least another $2.3 billion of debt, including by double-pledging collateral. The allegations are not adjudicated, and James's motion to dismiss argues that the complaint does not connect James to the factoring or the double-pledging beyond conclusory statements. Ruling on a preliminary injunction on November 12, 2025, the bankruptcy judge said nothing showed that James personally was manipulating invoices, but that it was clear First Brands was moving tens of millions of dollars through unaffiliated accounts. [src-003] [src-026] - Analysis: The federal indictment of Patrick James and Edward James, unsealed on January 29, 2026, alleges that under their direction First Brands employees routinely submitted fake, inflated and double-pledged invoices to sell and pledge them to at least four factoring partners. It says one factor ("Factor-1") raised "huge" discrepancies in about 2023 and that the scheme continued, citing a June 2025 customer invoice of $8,976.24 sold to that factor at $17,826.26 and three days later to another factor at $463,734.92, and that third-party factors now hold about $2.7 billion of fake receivables. On the payables side, the indictment alleges that, at the direction and with the approval of both brothers, First Brands submitted fabricated supplier-invoice data through financers' online platforms and had the funds sent to a third-party bill processor instructed to return them to First Brands instead of paying suppliers; these "round trips" or "corporate initiatives" were tracked in daily cash management, while the consolidated financial statements reported only a fraction of supply-chain-financing liabilities exceeding $1 billion. These are accusations, and the defendants are presumed innocent: both pleaded not guilty on February 4, 2026, and trial was set for February 9, 2027. [src-008] [src-005] [src-066] - Analysis: Peter Andrew Brumbergs, a former senior vice president of finance, pleaded guilty in January 2026 to eight counts, including fraud and conspiracy, and was seeking leniency in exchange for cooperation. According to press reports of the plea hearing, Brumbergs acknowledged reporting false accounts-payable levels to supply-chain financiers, including banks, between 2020 and 2025, knowing that some supply invoices were false and that the financial statements given to these lenders did not truly represent the company's financial condition. [src-012] ## Evolution Credit Partners and the factored receivables account - Analysis: Evolution Credit Partners, which bought rights to First Brands customer receivables, asserts a first-lien security interest in about $60.5 million of them. First Brands argues that Evolution has no right to them because of significant irregularities in its earlier factoring practices, and says its forensic expert found that the $60.5 million claim does not match any valid invoice in its records. Payments on factored receivables collected after the petition went into a segregated Factored Receivables Account, which held between $105.9 million and $109 million when the debtors asked to spend $63 million of it. The bankruptcy court (Docket No. 1133) let them draw up to $60 million, leaving about $49 million; it did not rule definitively on Evolution's interest but said it was not convinced Evolution had priority over other creditors. [src-098] - Analysis: Evolution appealed. On January 31, 2026 Senior U.S. District Judge Lee H. Rosenthal (Civil Action H-26-73) remanded the matter, holding that under section 363 a bankruptcy court may inquire into an asserted property interest only to see whether the creditor has a colourable claim, that the bankruptcy court had not ruled that Evolution lacked a security interest, that Evolution likely was not adequately protected when the cash use was allowed, and that new facts created a genuine dispute about its protection, to be litigated on remand together with its first-lien claim. On appeal the debtors represented that the account held over $67 million and that about $230 million of prepetition receivables were still owed to the estate, and agreed not to seek further releases before a February 19, 2026 hearing. [src-098] - Analysis: In adversary proceeding 26-3006, brought by Evolution and related entities to establish a first-priority interest in the roughly $60.5 million of receivables, the bankruptcy court denied Evolution summary judgment and held that it does not have a perfected security interest in the non-purchased receivables with priority over the postpetition debtor-in-possession lenders, because the collateral description in its financing statements cannot reasonably be read to include them; fact issues on its priority over other prepetition secured lenders were left for trial. On July 27, 2026 Judge Rosenthal (Civil Action H-26-4705) denied leave to appeal and dismissed Evolution's appeal for lack of jurisdiction, because the order was not final and the dispute did not justify an interlocutory appeal. 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