First Brands Bankruptcy Sparks Federal Probe into Suspected Factoring Fraud

First Brands, a major U.S. auto-parts manufacturer, has filed for Chapter 11 bankruptcy protection after revealing it owes more than $11 billion while holding very little available cash. The company’s downfall came after growing concerns from lenders and investors over questionable accounting and financing methods — particularly its use of off-balance-sheet debt and invoice factoring arrangements.

Investigators and creditors are especially focused on roughly $2.3 billion in receivables and financing funds that appear to have disappeared during the bankruptcy process. Reports suggest the losses may be linked to double factoring, where the same invoices are sold to multiple financing firms, or other forms of collateral misuse.

In response, the U.S. Department of Justice has opened an initial investigation into First Brands’ financial activities, and an independent committee of the company’s board is reviewing its complex web of funding structures and potential accounting discrepancies.

As the investigation continues, financial institutions with exposure to First Brands face mounting uncertainty over the recovery of hundreds of millions of dollars in receivables. The case underscores the fragility of complex trade-financing structures and the ripple effects that can emerge when a major player in the automotive supply chain collapses.

Source: NTD, The Epoch Times, Reuters, Wall Street Journal