In a significant development in the US financial leasing sector, FlexShopper Inc., a prominent provider of lease-to-own financing for consumer goods, has officially filed for Chapter 11 bankruptcy protection. This drastic step comes just months after the company terminated its Chief Executive Officer following an internal investigation that uncovered fraudulent loan documentation.
Bankruptcy Filing and Stalking Horse Bid
The Boca Raton, Florida-based company sought court protection in Delaware on Monday. Court documents reveal that FlexShopper has received an offer to sell its business to an affiliate of Snap Finance, a competitor in the lease-to-own industry. This offer is structured as a stalking horse bid, which sets a baseline price but allows for higher competing offers during a future bankruptcy auction.
According to its Chapter 11 petition, the company listed its assets at a minimum of $50 million against liabilities of at least $100 million, highlighting a substantial financial shortfall.
The CEO Fraud Scandal That Preceded the Fall
The bankruptcy filing is the culmination of a major corporate scandal. In August, FlexShopper fired its former CEO, Russell Heiser, after an internal probe. The company alleges that Heiser provided the firm's auditor with forged documents to falsely support reported loan receivables and revenues.
In a court declaration, FlexShopper's Chief Restructuring Officer, Matthew Doheny, made further serious accusations. He stated that Heiser was also involved in "pledging collateral that did not exist or meet the eligibility requirements" under one of the company's key lending facilities.
Internal Investigation and Financial Fallout
The company's board initiated the internal investigation after a member of the finance department raised red flags. The findings were severe enough that in July, FlexShopper publicly warned that its previously issued financial statements should no longer be relied upon by investors or stakeholders.
Attempts to reach former CEO Russell Heiser for comment were unsuccessful at the time of the reporting.
Business Model and What Comes Next
FlexShopper's core business involves providing customers with lease-to-own financing options for a wide range of products, including refrigerators, furniture, televisions, and tablets. The company claimed to use a proprietary process that could approve payment terms and spending limits for customers "within minutes."
The future of the company now rests with the bankruptcy court process. The case, identified as FlexShopper Inc., number 25-12254, is proceeding in the US Bankruptcy Court for the District of Delaware. The proposed sale to Snap Finance's affiliate will be a key focus, pending any superior offers during the auction.
This case underscores the critical importance of corporate governance and internal financial controls, especially for firms operating in the competitive consumer credit and fintech space.
