A Chapin company has filed for bankruptcy amid charges it defrauded lenders of $160 million.
Arms wholesaler Ellett Brothers’ Delaware-based owners filed for bankruptcy this week after a lawsuit claimed they borrowed the money to help the company but kept most of it themselves.
Prospect Capital Corporation filed the lawsuit in Lexington County, according to The State newspaper, charging that Ellett Brothers’ owners, Wellspring Capital Management of Delaware:
• Drove it into debt from what once was the 5th largest private company in the state, a locally-owned sporting goods distributor with $750 million in annual revenue, 175 local employees in 250,000 square feet in Chapin and the largest US distributor of firearms to thousands of retailers.
• Borrowed $280 million from Prospect Capital and other lenders including Bank of America, Wells Fargo, Regions Bank and Summit Partners Credit Fund to pay down debts. But the remaining $134 million was redirected to Wellspring and its partnerships, executives, investors and shareholders. Ellett Brothers received nothing from the deal.
• Prospect loaned another $60 million to Ellett Brothers but nearly $55 million went to people outside the business whose “primary concern was to keep the enterprise ostensibly afloat for as long as possible to continue collection fees.”
The lawsuit claims almost $189 million was taken by equity-holders of SportCo, an indirect parent of Ellett Brothers including:
• Todd Boehly who received $2.8 million.
• Andrew Kupchik who received $1.7 million.
• F. Hewitt Grant who received $955,070.
• Bernard Ziomek who received $140,741.
• Charles E. Walker Jr., who received $95,423.
The suit claims Wellspring Capital collected $6 million in “management fees.”