It came in on a wave of populist rhetoric, but the credit underpinnings of GloriFi tell a different story. The bombastic pitch (“the pro-America, pro-freedom, pro capitalism technology company offering best-in-class financial products empowering members to put their money where their values are and preserve the Country they believe in”) led to insolvency and a long game of bankruptcy chess. But bankruptcy itself speaks to the credit underpinnings of GloriFi.
Credit Underpinnings In A Long Bankruptcy Chess Game
GloriFi was slated for acquisition by a SPAC in spring 2023 at a target valuation of $1.65 BN. In February 2023 it filed for Chapter 7 bankruptcy with $40 MM in liabilities. The Wall Street Journal covered its demise in a string of articles from mid-October to late November 2022, even implying a role for itself in Neugebauer’s resignation.
To me, it was an open-and-shut case about a fintech-wannabe-bank conceived by a local millionaire and son of an entrenched conservative politician from West Texas. He had a bold marketing strategy, an animus against green investing, and had zero knowledge of credit. But Forbes’ John Hyatt offered an equally compelling story from Neugebauer’s viewpoint about how predatory tech-bros conspired to steal his dream.
Neither account fully ties with information that has since come out of public court records and regulatory actions.
I Bet You Missed The Hidden Credit Underpinnings Of GloriFi…
…because at first, so did I.
Despite its short operating history, GloriFi’s bankruptcy case has lasted over two years. Still far from resolved, the outcome must matter to both sides—three, in fact.
In March 2023, Seven Talents sued Neugebauer alleging fraud on the $11 MM of startup capital plus breaches of fiduciary duty, unjust enrichment, exemplary damages and self-dealing to run the business into the ground and steal the assets. Then Neugebauer counter-sued on racketeering charges. Scott Seidel, representing the bankruptcy estate, separately sued Neugebauer for the estate, on the grounds of exploiting the judicial system for propaganda and publicity. Etc.
In late summer 2023, Neugebauer sued the investors for sabotaging his startup. He attempted to move the case from Chapter 7 liquidation to Chapter 11 reorganization and remove Seidel.
In August 2024, Judge Michelle Larson vented her exasperation at the lack of progress: “I believe that once again folks are playing a big game of chicken. [It] reeks of legal tactics, which the court does not find attractive,” she said.
A Game Of Chicken? Or A Long Bankruptcy Game Of Chess
Many people are unaware that an equity investment is a stake in the business, not a liability to be repaid. The presence of debt makes borrowers contractually liable for repayment. News about the tactics to shift the case theory from liquidation to reorganization is right there. Yet no one in the media is asking why it is a bankruptcy, or where the $40 MM in liabilities comes from.
Hyatt says that in April 2022, Neugebauer raised $10 MM to convert the investor debt into shares. This point does not tie with the later case records and prospectus disclosures. There, we find the $11 MM of startup capital (equal to the bankruptcy claims) took the form of convertible promissory notes, which would be convertible to equity following acquisition by the SPAC DHC Acquisition Corp. The liabilities of the bankruptcy estate come close to $55 MM – $11 MM = $44 MM less lawyer fees. But, if GloriFi was purely an equity deal by July 2022, what are these liabilities?
Hence, the question in my earlier Forbes blog—“How does $55 MM vanish in four months?”—is still central to the meaning of the story. And since by law, someone, somehow must repay their liabilities, what does it matter whether the case theory is Chapter 7 (liquidation) or Chapter 11 (reorganization)?
What other credit puzzle pieces are missing in media accounts that could be material?
Hidden Credit Underpinnings of GloriFi
First, as my first blog says, Animo Mortgage Company LLC (TX) doing business as GloriFi was in existence after September 23, 2021, along with 44 other mortgage companies named Animo in different states. The state of Connecticut issued a Cease-and-Desist Order and notice of intent to revoke Animo’s mortgage license in June 2023 pursuant to the cancellation of its surety bond, a condition precedent of operating as a mortgagor, issued to Animo by The Cincinnati Insurance Company. The status of the other 44 companies is unknown. This is relevant—but how?
Second, without more information, the number of private groups suing each other is like a tale told by an idiot: full of sound and fury, but signifying not very much to the reader. Along with Toby Neugebauer, there are WPI Collateral Management, Banzai Advisory Group LLC, Banzai Capital Partners, LLC, Neugebauer Family Enterprises, LLC, plaintiffs, suing Vivek Ramaswamy, Strive Enterprises Inc. Strive Asset Management, LLC, Joseph Ricketts, James Nick Ayers, Jospeh Lonsdale, Peter Theil, Jeffrey Sprecher, Richard Jackson, Breanne Harmsen, Jonathan Pennington, Old Glory Intellectual Property Holdings, LLC, Citadel, LLC, The Founders Fund VI, LP, The Founders Fund VI Principals Fund, LP, The Founders Fund VI Entrepreneurs Fund, LP, Keri Findlay, Carson Carter, Brittany Amos, Jerome T. Fadden, Manuel Rios, Seven Talents, LLC, Nicholas Ayers 2021 Irrevocable Trust, Ayres Family Holdings LLC, Zing America, Inc, Old Glory Holding Company, Vivek Ramaswamy Investments LLC, Jackson Investment Group, LLC, GFNCI, LLC, Descante Capital, LLC and Lonsdale Family Revocable Trust Dated February 15, 2018. What it signifies to me is how easy it is for private capital to hide their money movements.
Third is the fact that Neugebauer put the family’s 18,000 square foot mansion on the market in June 2024. A White House lookalike, it was the home of George W. Bush and Ross Perot, and is currently the most expensive house in Dallas. It was also GloriFi’s infamous base of operations. The price tag is $40 MM price tag, which is 363% more than the $11 MM Neugebauer paid for it in 2018. Where have we heard these numbers before: $11 MM and $40 MM. Coincidence? Or collateral? Under a Chapter 7 resolution, the home could be exempt from a Texas bankruptcy estate; but under Chapter 11, the owner’s personal assets are not at risk.
Fourth, and perhaps a true coincidence, GloriFi offered its credit cards through Evolve Bank & Trust, a century-0ld bank that was First State Bank of Cross County, AK, before Scot Lenoir purchased and rebranded it in 2005. At its peak, Evolve’s platform managed about $10 BN in banking services to fintech firms. They lost customer funds in April 2024 and were the recent subject of a Fed enforcement action. This is an evolving story.
So Many Uber-Rich, Such Small Stakes—Why?
With Purpose, Inc., better known as GloriFi, opened its doors with a branding strategy, strongly patriotic and with religious undertones. The details of its collapse were tabloid. But the unfolding story is intricate, disturbing—gothic—with perhaps an entirely different, soberer lesson to consider. This is about money, after all.
A complicated, opaque battle is seemingly being waged using small money stakes between the uber-rich powered by tech and crypto investments, and a conservative-valued, entrenched family in West Texas with deep, traditional financial services connections. Because these are private credit markets where disclosures come after the damage is done, if at all, and are too complex for media to dig in. So the stakes are unclear, hidden behind the credit underpinnings of GloriFi—but apparently big.