San Antonio-based attorneys helping Ferrum Capital victims recover money are concerned a group of companies are trying to move legal proceedings to Delaware – saying it would hurt victims’ recovery efforts.
“I’m sure it causes the plaintiffs a sense of frustration. This is something that I told the plaintiffs a year-and-a-half – two years ago – would happen when we started getting warm. When we started honing in on where the money went, ‘There’ll be a bankruptcy filing.’ And sure enough, that’s what happened,” said Randall Pulman, who represents more than 90 plaintiffs.
He called the move “right out of the Ponzi scheme playbook.”
Michael King, another San Antonio attorney representing more than 70 plaintiffs, called it “shenanigans.”
This is a complex story, so we’ll set the table:
- Lubbock-based Ferrum Capital – owned by Josh Allen and Mike Cox – defaulted and was put under a receivership following a lawsuit. They had been given millions of dollars from hundreds of people who were promised good returns from buying distressed debt. Some lost their retirement savings or life savings.
- Ferrum loaned money to Collins Asset Group, a debt collection company. Collins filed for bankruptcy in Delaware, which we recently covered.
- At least seven Ferrum lawsuits have been filed in Texas.
- John Patrick Lowe, a receivership trustee in one of those Texas lawsuits filed in San Antonio, went after several companies in court to get money back for the Ferrum participants.
- Four of those companies – Oliphant, Inc. Oliphant Financial, Oliphant USA (collectively “Oliphant”) and Accelerated Inventory Management – removed the San Antonio lawsuit from state court to federal bankruptcy court. They used the Collins bankruptcy filing as the legal basis for the move.
Collins and Oliphant have common ownership, Pulman said.
The owners spun out Collins Asset Group from Oliphant in September of 2023 when they stopped paying Ferrum.
randall pulman
“The owners spun out Collins Asset Group from Oliphant in September of 2023 when they stopped paying Ferrum,” Pulman said.
Royal Lea, a San Antonio attorney working for receivership trustee Lowe, wrote in court records, “Josh Allen and Michael Cox, the managers of Ferrum, were dishonest frauds who stole millions of dollars of investor funds in the Ferrum Capital Ponzi scheme together with other Ferrum insiders and transferees. Collins and the Oliphant Entities were substantial beneficiaries of the Ponzi scheme.”
LubbockLights.com reached out to attorneys for the Oliphant companies, Accelerated Inventory Management, Collins Asset Group and Walt Collins via email. We additionally reached out to attorneys for the Oliphant companies by phone to offer a chance to comment. They did not respond.
Moving case to Delaware?
All three attorneys who spoke to LubbockLights.com – Pulman, Lea and King – agreed if the lawsuit continues in front of a San Antonio bankruptcy judge, Oliphant and Accelerated Inventory Management will likely try to move the whole thing to Delaware.
Pulman is ready to challenge that, saying bankruptcy courts are not set up for jury trials.
“My plaintiffs’ claims against Oliphant will not be tried in a bankruptcy court unless everybody waives the right to a jury trial,” Pulman said.
Pulman will ask a Texas bankruptcy judge to send the lawsuit back to state court. But that’s not all.
Pulman does not want the Collins bankruptcy to stay in Delaware. Collins is organized under Delaware law, but its primary place of business is Austin.
“We’ll be filing motions to move it to Texas,” Pulman said.
“The difference of doing it in Delaware for us is it just makes it more expensive and time-consuming,” Pulman said.
King added, “Right now, our assessment is we have to regard this in the same vein as the rest of this investment scheme and to be something that’s being done in bad faith.”
“I think our characterization of what’s happened here is that there has been a great deal of gamesmanship on the parts of these investment conspirators to deprive the investors of their money and then to follow a series of steps designed to make it difficult or impossible to recover those monies,” he said.
Related: Ferrum Capital coverage
A debt collection firm would know better than almost anyone else how to avoid ultimately having to pay someone back.
michael king
“A debt collection firm would know better than almost anyone else how to avoid ultimately having to pay someone back. … This whole thing is pretty typical when what you’re trying to do is run out the time and frustrate your pursuers until maybe they realize that they’re pushing good money after bad,” King said.
“Certainly, it’s something designed to be frustrating and to kill a lot of time that could otherwise be used to find the money that has gone missing,” King said.
The move raised questions, for example, could a Texas receiver operate in a Delaware bankruptcy case? Lea, attorney for receiver Lowe, told LubbockLights.com he hopes it won’t come to that.
“Companies and lawyers hoping to avoid paying, generally employ these strategies to further delay and complicate the proceedings. … I don’t think they were looking at what’s best for the investors. I think they were looking at what’s best for the Oliphant parties,” Lea said.
Having a state court receiver is a good reason to send the case back to state court, Lea added.
When Collins filed for bankruptcy, it was not all bad news for those trying to get their money back from Ferrum, Lea said.
“Collins Asset Group CAG should soon be submitting its detailed financial disclosures – its schedules and statement of financial affairs in the Delaware bankruptcy court. The receiver has been asking all along where is the money and those schedules and statement of financial affairs should provide all of us a lot more information about where the money is,” Lea said.
Texas Uniform Fraudulent Transfer Act
Receiver Lowe said a significant portion of the money Ferrum sent to Collins went to the Oliphant companies and Accelerated Inventory Management, also debt collection companies.
Lowe is using the Texas Uniform Fraudulent Transfer Act to say Ferrum broke the law when the proceeds ended up in the hands of the four companies.
Houston law firm Henke & Williams (not involved in the case), provides an online explanation: “TUFTA … prohibits people who owe money to creditors from defrauding the creditors by moving assets so the creditors cannot access them.”
Receiver Lowe’s claims (click to expand)
● Ferrum Capital took approximately $67.7 million from retail investors in the form of “bogus” promissory notes.
● Ferrum insiders took approximately $13.6 million for themselves and delivered about $47.6 million to Collins.
● Collins used Ferrum money to buy “packages” of old, distressed debt.
● Collins collected more than $49 million of the debt but only returned only about $18 million to Ferrum.
● Collins was a “net winner” of about $29.6 million in the “Ferrum Ponzi scheme.”
● Ferrum told investors payments would come from Collins collecting on the debt packages pledged as a partial security interest to Ferrum.
● Collins “materially breached its promise” to pay what it owes on the debts “by repudiation, announcing that it will not pay them when due.”
● “The books and records of Collins and the Oliphant Entities show that Accelerated Inventory Management, Oliphant Financial, and Oliphant USA together took approximately $40 million in cash out of Collins.”
● Collins was already insolvent when it took money from Ferrum.
● In 2023, “Collins admitted to its auditors that its owners’ equity account and income had been negative for at least the previous five years.”
Details from Ferrum San Antonio lawsuit (click to expand)
● Nearly $84 million “flowed from investors and/or their IRA custodians or trusts through to the Ferrum Entities.”
● Ferrum insiders “then paid themselves 10.75 percent of the proceeds.”
● Ferrum sent $47.6 million “to an account owned and controlled by the Oliphant Entities.”
● Collins then purchased “bad debt portfolios for collection” from the Oliphant companies.
● Collins and Oliphant collected roughly $50 million from the bad debt portfolios but kept $32.5 million, sending only $17.5 million plus $3 million in interest payments to Ferrum.
● Cox, Allen and Landzacha Holdings (a company founded by Allen) transferred, according to the lawsuit, at least $21 million or more to themselves and their affiliates such as Brooklynn Chandler Willy – who so far is the only one charged with a crime.
● The lawsuit also claimed, “Some early investors received their investments and some interest back, but for the most part, the investors received little to nothing back on their investment which were represented to them as ‘guaranteed’ or a ‘sure thing.’”
What the four companies are doing
In the notice of removal, the four companies laid out the legal claims against them without admitting or denying any of it. Their legal argument is any money they might owe must be handled by the Collins bankruptcy case – not the San Antonio lawsuit.
The removal document said, “The assets [i.e. money Ferrum transferred to Collins] that form the basis of Receiver’s claims are property of the Debtor’s [Collins’] bankruptcy estate.”
It also said the state court lawsuit “would severely undermine” a bankruptcy trustee’s work in the Collins case.
Oliphant and Accelerated Inventory Management claimed the Chapter 7 trustee in Delaware has now inherited the Ferrum receiver’s rights to pursue “certain alleged fraudulent transfers.”
