A Ponzi in the Parts Aisle: How First Brands' Founders Allegedly Engineered a $9 Billion Collapse
NEW YORK – The dramatic unraveling of First Brands Group, a titan of the auto aftermarket, has taken a decisive turn with federal prosecutors unveiling criminal charges against its founder and former CEO, Patrick James, and his brother, Edward James. The indictment paints a picture of a sophisticated, multi-year fraud that prosecutors allege systematically looted billions from lenders, propping up the company's meteoric rise before its inevitable, debt-laden fall.
The charges, unsealed in the Southern District of New York, accuse the James brothers of conspiracy to commit bank and wire fraud, money laundering, and running a continuing financial crimes enterprise. At the heart of the case is the allegation that from 2018 until the company's 2025 bankruptcy, the duo manipulated financial records and financing practices to obscure First Brands' true financial health while personally enriching themselves.
"This was not a business failure; it was a calculated deception," stated U.S. Attorney Damian Williams in a press briefing. "The defendants allegedly built a financial house of cards, using falsified invoices and double-pledged collateral to secure new loans to pay off old ones, all while diverting hundreds of millions for their personal use."
Prosecutors contend the scheme functioned like a classic Ponzi structure within the corporate world. First Brands, which began as Crowne Group in 2013, grew aggressively by acquiring well-known brands like Fram and Autolite. This expansion was fueled by invoice factoring—a common practice where businesses borrow against accounts receivable. However, the government alleges the brothers used doctored or entirely fictitious invoices, sometimes borrowing multiple times against the same receivables, to secure financing under false pretenses.
The fallout has been severe. When First Brands filed for Chapter 11 protection in September 2025, it listed staggering liabilities over $9 billion against minimal cash. The collapse rattled the private credit market, where lenders like Jefferies and UBS now face significant losses, and forced automakers like Ford and GM to step in with emergency financing to maintain parts supply.
Beyond the criminal case, a civil lawsuit from the bankruptcy estate details an extravagant lifestyle funded by the alleged fraud: luxury homes, exotic cars, a New York townhouse, and payments to family-linked businesses. The estate claims over $700 million was transferred to Patrick James or his affiliates—claims he denies.
Adding to the prosecution's case, former First Brands executive Andy Brumbergs has pleaded guilty and is cooperating. The James brothers, arrested in Ohio, face decades in prison if convicted. Their attorneys have vowed a vigorous defense, suggesting the case hinges on what was disclosed to lenders during the company's rapid growth.
The saga of First Brands is far from over, with implications lingering for corporate governance, private lending practices, and the stability of automotive supply chains.
Industry Reaction
Michael Torres, Supply Chain Analyst at Bergman & Co.: "This case exposes a critical vulnerability in the private credit ecosystem. The reliance on self-reported invoices without robust, independent verification created a perfect environment for this kind of fraud. Lenders will be tightening protocols industry-wide."
Lisa Chen, Portfolio Manager at a major pension fund (with exposure to First Brands debt): "We're conducting a thorough internal review. It's a sobering lesson in counterparty risk. The due diligence models clearly failed to detect the scale of the alleged misrepresentation."
David "Skip" O'Malley, former mechanic and host of the 'Wrench Turners' podcast: "It makes my blood boil. These guys were living like kings while selling filters and wiper blades to guys like me trying to make an honest living. They weren't just cheating banks; they were playing with the livelihoods of everyone in the repair shops that depended on that supply chain. It's pure greed, and I hope the book gets thrown at them."
Eleanor Vance, Bankruptcy Attorney at Vance & Holt: "The civil litigation will be a marathon. Untangling where the legitimate business ends and the fraud begins is a monumental task. The key will be tracing the flow of funds from those fraudulent loans directly to personal assets."
Reporting contributed from New York and Cleveland. Source materials include filings from the U.S. Department of Justice and Associated Press reports.