The private equity firm behind the failed Australian low-cost airline Bonza, which collapsed into administration last Tuesday, has been accused of a multi-million-dollar fraud in a new lawsuit filed in a New York court on Friday.
Miami-based 777 Partners describes itself as a private investment firm that ‘invests across a number of high growth attractive verticals’ including sports, media and aviation, as well as insurance and commercial finance.
Co-founded by Josh Wander in 2015, the firm is also behind Canada’s ultra-low-cost carrier Flair and with up to 134 Boeing 737s on order, 777 Partners has ambitious plans to launch even more airlines.
The lawsuit, however, claims that Wander is responsible for a “years-long pattern of fraud” and has built a “house of cards on the brink of collapse”.
The allegations have been made by Leadenhall Life Insurance Linked Investments Fund, which agreed to offer Wander and 777 Partners a credit facility of up to $350 million on the proviso that 777 Partners used assets that it actually owned as collateral.
Wander, however, is accused of double-pledging those assets, effectively turning the credit facility into an “illegal and unsecured personal piggy bank” the lawsuit alleges.
Leadenhall agreed to offer Wander the credit facility with a preferential interest rate in May 2021, but more than a year and a half later, the firm received an anonymous tipoff that Wander had already pledged the assets to another lender.
Last year, Wander allegedly admitted to double pledging some assets in what he described as an embarrassing mistake in a recorded conference call, the lawsuit alleges. Leadenhall, however, claims Wander hadn’t come completely clean with it.
The lawsuit says 777 Partners are closely tied up with a New York-based insurance company, Advantage Capital Holdings, or A-Cap for short. A-Cap is allegedly the ‘silent partner’ behind all of Wander’s businesses, providing the firm with at least $1 billion in loans to fund its dealings.
In fact, A-Cap and 777 Partners are so intertwined, the lawsuit alleges, that A-Cap has secured “the right to control all facets of 777 Partners’ operations”.
Through 777 Partners, Wander is currently pursuing a takeover of English Premier League soccer club Everton FC – The “latest shiny object of Wander’s fraudulent scheme,” the civil complaint reads.
“Wander’s strategy has been continued expansion—using debt to acquire new assets that he can then use as collateral for more debt, which he then fails to timely pay off, in a seemingly never-ending cycle of ‘robbing Peter to pay Paul.'”
The complaint accuses Wander of “operating a giant shell game at best, and an outright Ponzi scheme at worst, that takes money in from investors and lenders and shuffles it around to various money-losing alter egos in the enterprise to disguise their true financial condition”.
The lawsuit is being brought in the Southern District of New York under case reference: 1:24-cv-03453
Bonza announced on Thursday that it had suspended flights until May 7 while talks with administrators and stakeholders continue about the future viability of the airline.
