FlexShopper: Executive Fraud Collapses Fintech Pioneer in Five-Month Downfall

When FlexShopper's board suspended H. Russell Heiser Jr. as CFO without pay on July 31, 2025, and terminated him as CEO six days later, the internal investigation was ongoing. Internal investigators had discovered that Heiser used forged loan documents to secure financing for the company, resulting in overborrowing of more than $140 million under the company's securitization program. By December 22, 2025, FlexShopper and seven affiliated entities filed for chapter 11 protection in Delaware, with a stalking horse offer from competitor Snap Finance already in hand.

With financial statements for 2022 and 2023 deemed "unreliable" due to the alleged fraud, FlexShopper reported that its historical financials could not be relied on. The company's warehouse lenders held guaranty claims exceeding $165 million, and the filing indicated no funds would be available for distribution to unsecured creditors after administrative expenses.

Debtor(s)	FlexShopper, Inc. and 7 affiliated debtors (FlexShopper LLC, FlexLending LLC, FlexRevolution LLC, FlexRetail LLC, Flex TX LLC, Flex TX Funding LLC, Flex TX CAB LLC)
Ticker	FPAY → FPAYQ (delisting pending)
Court	U.S. Bankruptcy Court, District of Delaware.
Case Number	25-12254
Petition Date	December 22, 2025
Total Assets	$50-100 million
Total Liabilities	$100-500 million
TTM Revenue	~$140 million
Lead Counsel	Mayer Brown LLP
Claims Agent	Epiq Corporate Restructuring, LLC
Stalking Horse	ReadySett LLC (Snap Finance affiliate)
DIP Facility	lender: ReadySett LLC ($8 million)

Fraud Investigation and Bankruptcy Trigger

H. Russell Heiser Jr. as CEO and CFO

Financial analysis platforms noted the filing came after the company fired its CEO following an internal fraud investigation. H. Russell Heiser Jr. held dual roles as both Chief Executive Officer and Chief Financial Officer.

According to court filings and news reports, Heiser allegedly used forged loan documents to secure financing for FlexShopper. The fraudulent misrepresentations occurred within the company's securitization program—the core mechanism by which FlexShopper funded its lease-to-own operations. Overborrowing exceeded $140 million under the securitization facility.

The securitization program functions by selling receivables from FlexShopper's consumer leases to special purpose vehicle (SPV) subsidiaries. Warehouse lenders provide funding secured by the equity in these SPVs and the underlying receivables. When the borrowing base—the amount that can be drawn based on eligible receivables—is manipulated through forged documentation, the lender extends credit against ineligible or overstated receivables.

Timeline of Discovery and Termination

The timeline from discovery to filing spanned less than five months:

The Scope of Financial Damage

The fraud's impact extended across multiple dimensions of FlexShopper's financial position:

Financial Statement Unreliability: The company's financial statements for 2022 and 2023 were deemed "unreliable" due to the alleged fraud.

Warehouse Lender Exposure: The warehouse lender's claim under the validity guaranty totaled at least $165,776,149, representing the overborrowed amount plus associated damages. This claim is classified as unsecured, meaning the warehouse lenders must compete with other unsecured creditors for whatever value remains after secured claims are satisfied.

Credit Agreement Defaults: The overborrowing triggered defaults under the warehouse credit agreement, forcing the company into forbearance amendments with its lenders. The 2024 Warehouse Facility had a maximum principal amount of $200 million.

The board's response included both termination of the executive and restructuring of governance. Denis Echtchenko resigned from the Board of Directors, with Steven Varner appointed as his successor. Matthew A. Doheny was appointed as Chief Restructuring Officer, and North Country Capital LLC was engaged for interim management and restructuring advisory services. At the time of his termination, Heiser held 770,277 shares of FlexShopper common stock.

FlexShopper's Business Model

Lease-to-Own Business

FlexShopper was founded in 2003 in Boca Raton, Florida, a fintech providing lease-to-own solutions by Brad Bernstein and George Rubin.

The business model centered on providing durable goods to consumers on a lease-to-own basis. Rather than extending credit directly, FlexShopper provided LTO terms to consumers of third-party retailers and e-tailers. Products included:

• Electronics and computers
• Furniture and mattresses
• Cameras and audio equipment
• Musical instruments
• Health, fitness, and sports equipment
• Video games
• Home, garden, and tools
• Appliances

Company databases track FlexShopper's products, competitors, financials, and market position within the alternative financing landscape.

The Securitization Program

The securitization program represented the funding mechanism that supported FlexShopper's business model:

Receivables Sales: FlexShopper originated lease agreements with consumers. The payment streams from these leases—the receivables—were sold to SPV subsidiaries.

Warehouse Funding: Warehouse lenders provided capital to the SPVs, secured by their equity interests and the underlying receivables. This funding enabled FlexShopper to originate new leases at scale without tying up its own capital.

Borrowing Base: The amount available under the warehouse facility was determined by a borrowing base calculation tied to eligible receivables. Forging documentation to inflate the borrowing base created artificial lending capacity.

When Heiser allegedly forged loan documents, he created the appearance of eligible receivables that did not exist or did not have the represented value. The warehouse lenders extended credit against these receivables. When the fraud was discovered, the lenders held claims for the overborrowed amounts.

The business requires ongoing access to warehouse funding to support new lease originations, and the debtors are seeking authority to continue the securitization program postpetition.

Competitive Landscape

FlexShopper operated in a competitive environment that included both traditional rent-to-own retailers and newer fintech entrants:

Industry databases identify Aaron's Inc., Rent-A-Center, Progressive Leasing, Klarna, and Affirm as FlexShopper's key competitors in the alternative financing space.

Snap Finance, a direct competitor, emerged as the stalking horse bidder.

Just months before the crisis, the company had partnered with ICON Vehicle Dynamics to expand lease-to-own financing options for premium off-road vehicle upgrades. Prior to the fraud disclosure, FlexShopper reported trailing twelve-month revenue of approximately $140 million, a market capitalization of approximately $40.5 million, and roughly 24.6 million shares outstanding trading on NASDAQ under ticker symbol FPAY. Company profile databases tracked the company's funding, competitors, and financials leading up to the crisis. The company had positioned itself as an "Amazon rival" in the lease-to-own space.

The Path to Chapter 11

On October 14, 2025, Nasdaq notified FlexShopper that it intended to delist the company's common stock after FlexShopper did not file timely financial reports. Nasdaq granted a 180-day extension, allowing until October 13 to submit the 2024 annual report and Q1 2025 financial statements. By December 23, 2025—the day after the bankruptcy filing—market observers noted FlexShopper's stock began trading under the new symbol FPAYQ, indicating securities in bankruptcy proceedings.

The forged documentation triggered defaults under FlexShopper's credit arrangements. Upon discovery, the company entered forbearance amendments with lenders. FlexShopper remained in default while negotiating the stalking horse transaction with ReadySett, and the securitization program faced potential termination.

The five months between Heiser's termination and the bankruptcy filing included interim management and restructuring advisory services by North Country Capital LLC, appointment of a Chief Restructuring Officer, negotiation of the stalking horse agreement with ReadySett/Snap Finance, arrangement of DIP financing to fund operations, and preparation of first day motion packages. Interim orders were granted on December 23, 2025. Reuters coverage confirmed the company filed for Chapter 11 bankruptcy in U.S. court.

The 363 Sale Process

The sale structure places ReadySett LLC—an affiliate of competitor Snap Finance—as the stalking horse bidder for substantially all of FlexShopper's assets:

The $8 million closing payment, combined with the $7.5 million payment to warehouse lenders, provides approximately $15.5 million in baseline consideration. The filing indicates no funds will be available for unsecured creditors after administrative expenses. ReadySett is also providing debtor-in-possession financing to fund the bankruptcy case, with an initial draw of $2 million and a 15% interest rate. ReadySett is both the DIP lender and stalking horse bidder.

The stalking horse structure subjects the bid to higher and better offers.

The debtors are seeking court authority to continue existing securitization program operations postpetition, accept potential new advances up to $25 million under an amended warehouse credit agreement, and maintain the funding mechanism for ongoing lease originations.

Case Milestones

First Day Relief and Prepetition Claims

The debtors filed first day motions addressing operational needs: joint administration of eight debtor entities; critical vendor payment authorization; tax and fee payment authorization; utility adequate assurance procedures; employee wage and benefit payments; cash management system continuation; PII sealing motion protecting customer data; DIP financing approval; securitization program continuation; claims agent retention (Epiq Corporate Restructuring); and bid procedures and asset sale motion.

These authorizations total approximately $2.2 million in immediate prepetition payments. Matthew A. Doheny, the Chief Restructuring Officer, filed the first day declaration supporting the debtors' motions, describing the fraud discovery and management response, the company's business operations and securitization structure, the events leading to bankruptcy, the proposed sale process and DIP financing, and the rationale for each first day motion.

Debt Structure and Creditor Treatment

FlexShopper's debt structure reflected its securitization-based business model:

The warehouse facility's maximum capacity of $200 million represented the lending limit. The validity guaranty claim of at least $165.8 million reflects the overborrowed amounts—funds advanced against assets that did not exist or had been misrepresented. While the warehouse lenders hold security interests in the equity of SPV subsidiaries and the underlying receivables, if the receivables were misrepresented, the collateral value may be less than the amounts advanced. The $165.8 million guaranty claim represents amounts that must be repaid if the underlying collateral is insufficient—classified as unsecured, meaning it competes with other unsecured creditors. Powerscourt Investments 50, LP serves as Administrative Agent for the warehouse lenders, coordinating lender interests in the bankruptcy case. The stalking horse bid allocates $7.5 million specifically to the warehouse lenders through the Administrative Agent.

Unsecured Creditor Outlook

The filing explicitly indicates no funds will be available for distribution to unsecured creditors after administrative expenses are paid. This determination reflects the reality of the financial situation:

• Total liabilities range from $100-500 million
• Total assets range from $50-100 million
• The warehouse lender guaranty claim alone exceeds $165 million
• Administrative expenses for the bankruptcy case must be paid first

Official Committee of Unsecured Creditors

Despite the filing's indication that no funds would be available for distribution to unsecured creditors, the U.S. Trustee appointed the Official Committee of Unsecured Creditors on January 6, 2026 (Dkt. 70):

The UCC will represent unsecured creditor interests in the sale process and plan negotiations, notwithstanding the projected lack of recovery. The committee may investigate the circumstances of the alleged fraud and potential causes of action that could benefit the estate.

Frequently Asked Questions

Why did FlexShopper file for chapter 11 bankruptcy?

Former CEO/CFO H. Russell Heiser Jr. allegedly used forged documents to secure financing for the company, resulting in overborrowing of more than $140 million under its securitization program. The fraud rendered financial statements for 2022 and 2023 unreliable and triggered credit agreement defaults.

What fraud did the former CEO commit?

Heiser allegedly used forged loan documents to inflate the borrowing base under FlexShopper's warehouse credit facility. This enabled the company to borrow more than the underlying receivables supported, creating an overborrowing of $140+ million that left warehouse lenders with significant unsecured claims when the fraud was discovered.

Who is buying FlexShopper?

ReadySett LLC, an affiliate of competitor Snap Finance, is the stalking horse bidder. The proposed transaction values substantially all assets at approximately $15.5 million, including an $8 million closing payment and $7.5 million payment to warehouse lenders. The sale remains subject to higher and better offers at auction.

What happened to H. Russell Heiser Jr.?

The board suspended Heiser as CFO without pay on July 31, 2025, and terminated his employment entirely on August 6, 2025. He held both CEO and CFO positions simultaneously. At termination, he held 770,277 shares of common stock.

What is FlexShopper's securitization program?

The securitization program is the core funding mechanism for FlexShopper's lease-to-own business. Consumer lease receivables are sold to SPV subsidiaries, and warehouse lenders provide funding secured by the SPV equity and receivables. This structure enables FlexShopper to originate leases at scale without tying up its own capital. The alleged forged documentation inflated the borrowing base under this program.

Will there be recovery for unsecured creditors?

The filing explicitly indicates no funds will be available for unsecured creditors after administrative expenses. The warehouse lender guaranty claim alone exceeds $165 million, and total liabilities substantially exceed assets.

Why is FlexShopper being delisted from Nasdaq?

FlexShopper failed to file timely financial reports due to the fraud investigation, which rendered prior financial statements unreliable. Nasdaq issued a delisting notice on October 14, 2025. The company now trades under symbol FPAYQ, indicating securities in bankruptcy proceedings.

What is the timeline for the bankruptcy case?

The company filed December 22, 2025, with first day hearing December 23. The final hearing on first day motions is scheduled for January 21, 2026, with sale process deadlines expected in late January or February 2026.

Who are FlexShopper's main competitors?

Major competitors include Aaron's Inc. and Rent-A-Center (traditional rent-to-own), Progressive Leasing (point-of-sale LTO), Klarna and Affirm (BNPL), and Snap Finance—which is now acquiring FlexShopper through its ReadySett affiliate. Other competitors include Zebit and Leaseville in the alternative credit space.

What governance actions followed the fraud investigation?

The board suspended Heiser as CFO without pay on July 31, 2025, and terminated his employment on August 6, 2025. Denis Echtchenko resigned from the Board of Directors, with Steven Varner appointed as his successor. The company engaged North Country Capital LLC for restructuring advisory services and appointed a Chief Restructuring Officer.

Who is on the Official Committee of Unsecured Creditors?

The U.S. Trustee appointed a three-member UCC on January 6, 2026 (Dkt. 70). Members include Apollo Sales LLC, PayPossible Inc., and Mavis Tire Express Services TopCo Corp. Despite the filing's indication that no funds will be available for unsecured creditors, the committee will represent their interests in the sale process and may investigate potential causes of action related to the alleged fraud.

For more analysis of chapter 11 cases and restructuring developments, explore the ElevenFlo bankruptcy blog.