Florida-based investment firm 777 Partners’ co-founder, Joshua Wander, has been charged with wire fraud and securities fraud offences by US authorities.
The indictment alleges that Wander and others participated in a scheme to defraud private lenders and investors of 777 Partners out of more than $500 million.
Former chief financial officer Damien Alfalla pleaded guilty in mid-October in connection to his role in the fraud scheme.
The company was wound up last year.
It was set up to underwrite and finance structured settlements whereby regular compensation payments are made to beneficiaries of lawsuits or injury claims.
Wander negotiated credit facilities with private lenders to finance the settlements, and the company had to secure these credit borrowings with future payments.
But the Federal Bureau of Investigation says he began investing capital from the structured settlement business into new sectors with “less certain” cashflow.
These included airlines – notably the Australian budget carrier Bonza and Canadian operator Flair Airlines.
777 Partners became a customer of Boeing, ordering 68 737 Max 8 jets – including the high-density Max 8-200 – through a series of agreements in 2021.
These aircraft were intended to expand the fleets of its low-cost carriers.
Wander described the agreements as “transformative” for 777 Partners’ aviation business, at a time when contraction of legacy carriers was presenting an opportunity for “more agile” operators.
The company continued its order run for the 737 Max the following year, with a deal for a further 66 aircraft.
Boeing’s backlog figures indicate that a total of 38 were delivered over the course of 2021-23. Flair Airlines is still operating, but Bonza was short-lived, ceasing services in April last year.
The FBI says 777 Partners’ diversification into riskier investments also included professional sports teams and streaming platforms.
“Despite warnings from employees…and contrary to the terms of the credit facilities, Wander directed that restricted funds from 777 Partners’ lenders be used to cover the firm’s acquisitions and expenses,” it alleges.
Substantial shortfalls in cash and collateral, it adds, were concealed by pledging over $350 million in assets as collateral to certain lenders – even though 777 Partners either did not own the collateral or had already pledged it to other lenders.
The FBI also accuses Wander of directing employees to alter bank account statements to reflect “millions of dollars in cash on hand that the firm did not have”.
US attorney Jay Clayton adds that Wander is alleged to have materially misrepresented 777 Partners’ financial condition while soliciting over $100 million in external investments in the company to deal with liquidity pressures during 2021-22. The situation “began to unravel” in March 2023, says the FBI, when lenders began questioning Wander about allegations of double-pledging of assets.
Both Wander and Alfalla have been charged with conspiracy to commit wire fraud, wire fraud, conspiracy to commit securities fraud, and securities fraud.
