First Brands Holdings’ collapse to bankruptcy and Ponzi scheme closes manufacturing businesses

The collapse of a holding company due to executive fraud has led to the closure of about half a dozen factories and layoffs for more than a thousand employees. Patrick and Edward James, respectively CEO and Senior Executive of First Brands Group LLC, were arrested on January 29in Ohio on charges of wire fraud, money laundering, bank fraud, conspiracy and other attempts to defraud lenders following First Brands’ bankruptcy in September 2025.

According to the Department of Justice, the two brothers engaged in a yearslong fraud scheme at the head of the holding company that eventually culminated in its bankruptcy. The collapse of First Brands, and its subsidiaries’ failures to find buyers, has led to closures at Toledo Molding & Die in Fayetteville Tennessee, resulting in 333 layoffs, and in  Bowling Green, Tennessee, laying off 302 more; at Champion Labs in Albion Illinois, which laid off 642; Eagle Machining in Fayette, Ohio, claiming 246 layoffs; and at Hopkins Manufacturing, laying off more than a hundred workers.

Other factories, including Jasper Rubber Products in Jasper, Indiana, are still in limbo: JRP is set to lay off its 345 employees by April 30 if the company can’t find a buyer. In all, First Brands owned roughly 25 automotive aftermarket brands, according to the DuBois County Free press.

According to investigators, the James brothers founded First Brands Group, LLC in 2018 and operated it through its bankruptcy in 2025. The prosecutors allege to keep the company growing, the brothers submitted fraudulent invoices and misrepresented them as collectable receivables from customers in order to secure loans. Additionally, investigators say, the brothers used business entities nominally distinct from First Brands to purchase inventory from First Brands on loans, then used the “purchased” inventory as collateral for more loans. The brothers concealed this arrangement from lenders, the Department of Justice says.

The grift lasted until the brothers tried to sell First Brands, but were unable to find a buyer. The Justice Department said that at the time of its bankruptcy, First Brands was reporting $5 billion in net annual sales but declared only $12 billion in cash on hand and $9 billion in liabilities.

What people are saying

“As alleged in the indictment, Patrick James, together with his brother, Edward James, perpetrated a staggering fraud at First Brands Group,” said U.S. Attorney Jay Clayton.  “The James brothers obtained billions for First Brands—and millions for themselves—by presenting their lenders with the impression of a successful, growing international business.  The indictment and the guilty plea unsealed today describe a very different reality: a business run through fraud, fake documents, and false financials.  Together with our law enforcement partners, we will continue working tirelessly to uncover every aspect of this fraud and vindicate the rights of every victim.”

“Individuals who lie about the financial health of their company for the purposes of greed create shockwaves across the business sector that endanger the economic wellbeing of others,” said U.S. Attorney David M. Toepfer.  “The fallout from selfish and deceptive actions—such as those alleged in this case—can cascade down to honest and hardworking company employees based right here in Ohio.  Their jobs and livelihoods are at stake due to the corrupt actions of a few individuals.  Together with our federal partners, we will seek justice on behalf of all victims affected by this travesty.”

“These executives allegedly inflated invoices, double- and triple- pledged collateral, and falsified financial statements to unlawfully trick lenders into giving them billions of dollars,” said FBI Assistant Director in Charge James C. Barnacle, Jr.  “Not only did their alleged deceit exploit the integrity of our financing system, they also betrayed the trust of the companies funding First Brands by mispresenting their business’s financial position.  The FBI will never cease its pursuit of fraudsters seeking to manipulate financial institutions for greedy gains.”

“HSI remains ever vigilant to detect money laundering and financial fraud schemes that undercut fair and honest business practices, especially one like this, which allegedly contributed to billions in losses,” said HSI Detroit Acting Special Agent in Charge Jared Murphey.  “HSI special agents, alongside our FBI and IRS partners, remain committed to enforcing the rule of law and ensuring justice for victims.  As law enforcement, we have a solemn responsibility to protect the integrity of our financial system and to hold violators accountable.”

“The defendants operated First Brands as a ‘Ponzi’ scheme in which new loan proceeds were used to pay back old lenders and to fund their extravagant lifestyle,” said Executive Special Agent in Charge of the IRS-CI Washington, D.C. Field Office Kareem Carter.  “Today’s announced indictment of defendants Patrick James and Edward James demonstrates IRS-CI special agents’ and our law enforcement partners’ commitment to investigate, prosecute, and hold accountable criminals who allegedly defraud banks and lenders out of billions of dollars.  IRS Criminal Investigation special agents are specially equipped to follow the complex financial trail left by criminals, and I would like to thank our Global Illicit Financial Team for their vigilant, professional, and dedicated pursuit of those who attempt to enrich themselves through fraudulent means.”