A Delaware court has ordered distressed-debt investor Thomas Braziel to repay approximately $1.95 million. Braziel had taken the money from a receivership he was overseeing and used it to fund his own investments and purchase luxury goods.
Misuse of Receivership Funds for Personal Gain
Braziel, a managing partner at 117 Partners based in Italy, gained prominence for purchasing claims in high-profile cryptocurrency bankruptcy cases, including those involving FTX, Celsius Network, and Voyager Digital. However, a vice chancellor at the Delaware Court of Chancery revealed in a memorandum opinion that Braziel had misappropriated funds from the receivership of Fund.com, a defunct financial services information company, for his personal benefit.
According to court filings, Braziel diverted money from Fund.com’s receivership to his personal accounts to finance high-risk investments and luxury purchases. The court has mandated that Braziel repay the $1.95 million, plus interest, within 20 days. Braziel and his attorneys have not responded to requests for comment on the court’s decision.
Initial Alignment of Interests Turns Into Divergence
Braziel’s involvement with Fund.com began in 2013 when he started buying shares through his investment fund, B.E. Capital Management Fund, eventually acquiring about 20% of the company. In November 2016, he was appointed as the liquidating receiver for the abandoned company, tasked with liquidating its assets and distributing the net proceeds to investors.
Initially, Braziel’s personal interests aligned with his receivership duties. He worked diligently to liquidate Fund.com’s assets, which promised substantial returns for his investment fund. However, as soon as Fund.com began receiving money from asset liquidations, Braziel’s priorities shifted. The court found that Braziel began using the funds to benefit himself rather than the company and its investors.
Lavish Spending and Risky Investments
The court discovered that Braziel transferred funds from Fund.com’s receivership to his personal accounts. He used these funds to make high-risk, high-reward investments and for personal luxury purchases. These included a sapphire ring, emerald-and-diamond earrings, a German watch, luxury hotel stays, art, and apparel. Additionally, he used the money to buy bankruptcy claims and invest in cryptocurrency, leveraged loans, and high-risk equities.
The misuse of funds came to light in December 2021 when a concerned shareholder accused Braziel of embezzling $3 million from the receivership. This prompted the court to initiate an investigation in January 2022 with a special magistrate. The investigation confirmed the shareholder’s allegations.
Court’s Decision and Future Steps
Braziel largely acknowledged the findings of the special magistrate. He has agreed to provide restitution and cover the costs of the investigation. The court’s decision not only orders him to repay the misappropriated $1.95 million but also paves the way for the appointment of a new successor receiver. The special magistrate has been tasked with identifying three qualified and willing individuals to take over the receivership duties.
This case underscores the critical importance of fiduciary responsibility and ethical conduct in financial management. Braziel’s actions, which initially appeared to align with the interests of Fund.com and its investors, ultimately diverged, leading to personal gain at the expense of the company’s stakeholders. The court’s ruling serves as a reminder that such breaches of trust and misappropriation of funds will be met with legal consequences.
