SEC seeks records from officers of John Ruiz’s MSP Recovery in probe

 The U.S. Securities and Exchange Commission subpoenaed four officers from lawyer John Ruiz’s insurance claims recovery business this summer as part of an ongoing investigation into the Coral Gables-based company’s practices, according to a financial filing in August. 

Two rounds of SEC subpoenas were issued in June and July “requesting additional documentation” from the four officers who work for Ruiz’s publicly held company, MSP Recovery Inc., according to the quarterly report filed with the SEC. The officers were not identified in the report.

 MSP Recovery has been under investigation by the securities agency for potential securities violations since 2022 over a host of issues, including its financial projections, investor agreements and the data analytics platforms and algorithms underpinning the company’s business model. The company tries to collect insurance payments that were paid by one party, instead of another.

 MSP Recovery disclosed in its recent SEC filing that it has received subpoenas from the U.S. Attorney’s Office in connection with a grand jury investigation in the U.S. District Court for the Southern District of Florida, according to the company’s recent SEC filing.

 Prosecutors most recently issued a subpoena last summer seeking corporate documents related to a press release. Ruiz declined to be interviewed for this article, and a spokesperson for the company would not identify the names of the four MSP Recovery officers who recently received subpoenas from the SEC, saying it would be “inappropriate."

MSP Recovery’s lead litigator, Janpaul Portal, referred the Miami Herald to the company’s SEC filings when asked about its financial health. But in an interview, Portal said: “MSP Recovery Inc. is doing business as usual.” 

Ruiz made a name for himself thanks to the millions of dollars in endorsement deals his company, then known as LifeWallet, signed with University of Miami athletes soon after these kinds of deals became legal in 2021. Ruiz also floated proposals to build a new football stadium for the university’s football team, which have not come to fruition. MSP Recovery CEO John H. Ruiz at his house in Coral Gables, Florida, Dec. 8, 2021. Pedro Portal Miami Herald fi

 Ruiz’s company first revealed issues with its financial disclosures in the spring of 2023, but the company did not publicly disclose the federal civil and criminal investigations until the Miami Herald published a story revealing their existence in July 2023.

 “Based upon the disclosures in the [MSP Recovery] company’s filings, it appears the SEC’s investigation is continuing with pace, which could signal an escalation,” said Chase, a South Florida lawyer who has defended individuals in securities cases for more than 25 years. 

The federal investigations aren’t the only legal issues confronting MSP Recovery, and the SEC disclosures come as the company acknowledged that its ongoing financial challenges could force it to file for bankruptcy. John Ruiz rings the bell to celebrate his company, MSP Recovery, being listed on the NASDAQ Stock Exchange in May 2022. In August, the SEC subpoenaed four officers from the firm as part of its investigation into the Coral Gables-based company.

Miami Jury awards millions to software developer; company to appeal In August, a Miami-Dade County Circuit Court jury awarded about $12.7 million against an MSP Recovery subsidiary in a contract dispute to the founder of a company that was acquired by MSP Recovery. According to the lawsuit, Ruiz, on behalf of the companies, reached an oral agreement in October 2021 to pay $12.5 million to buy the technology platform, software, trademarks and other intellectual property related to a “LifeWallet” app that was developed by computer engineer Norberto Menendez. 

The dispute boiled down to the nature of the oral contract. Ruiz claimed he offered $12.5 million in stock shares of the public company, MSP Recovery, as payment to Menendez. The software engineer, who had once worked for Apple, claimed that he had a choice between shares or cash – and chose cash. Menendez, who worked for MSP Recovery after selling the LifeWallet name and technology to the company but eventually resigned, claimed in a suit filed in 2023 that he was not paid. 

While the jury ruled in favor of Menendez on a breach-of-oral contract count against a subsidiary of MSP Recovery, it decided a half-dozen other counts in favor of Ruiz and the parent company. “We think it was a major victory because there was no wrongdoing found by the jury,” Portal, a lawyer with the MSP Recovery Law Firm, told the Miami Herald. The company plans to appeal the judgment. But Menendez and his legal team strongly disagreed. This week, Menendez posted a message on his LinkedIn account, saying the trial was like the “David v. Goliath” battle. 

His lead attorney, Scott Dimond, said: “This very sophisticated jury took an exceedingly difficult and messy litigation and reduced it to a simple and decisive conclusion: A deal is a deal.” MSP Recovery and a Miami-based financial company that brought it public have each been sued in Delaware lawsuits brought by an MSP shareholder named Virginia Stanley, who has requested financial records from the company and its directors. Revenue declines, deficit reported 

Those legal developments come as the company admitted in its quarterly filing that it’s in a precarious financial position. For the first six months of this year, the company reported $1.37 million in revenue, roughly one-fifth of the $6.3 million in revenue it reported in the first six months of last year. That’s quite different from the lofty projections the company presented to investors when the company was first publicly traded in 2022, with a valuation of more than $32 billion. 

In a May 2022 letter to stockholders, the company that brought MSP Recovery public shared projections showing that MSP would bring in more than $6 billion in revenue from its primary business of recovering wrongfully paid insurance claims, netting the company more than $4.3 billion after taxes. Instead, the company said in the latest quarterly filing that it had accumulated a “deficit” of $710.8 million through the end of June. 

Earlier this year, the company said that it was embarking on a restructuring plan with two of its significant funders. But in its quarterly SEC filing this month, MSP Recovery said one of the two funders pulled the plug on the restructuring plan, leading the other lender to follow suit. 

The company said that a third funder, Yorkville, is its only source of additional money to pay for short-term operational costs and that if Yorkville is “unwilling or unable” to provide additional funds, “the Company may be forced to initiate an insolvency proceeding or seek protection under U.S. bankruptcy laws.”

 Earlier this week, in a separate SEC filing regarding the Miami-Dade County jury verdict, MSP Recovery noted: “The jury verdict in the Menendez Litigation has contributed to uncertainty regarding the Company’s financial condition and prospects and may negatively impact its ability to raise additional capital or to continue as a going concern.” 

On Friday, MSP Recovery issued a press release saying it “entered a non-binding term sheet” spelling out conditions “for a new secured” loan up to $55 million. 

“The agreement ... would provide the Company and its affiliates significant working capital and additional operational funding aimed at driving future growth,” the release said. But the company did not disclose the name of the new lender and did not provide that information when the Herald requested it. 

“As stated in the company’s 8K [filing with the SEC] and press release, we are unable to disclose the lender’s identity due to an existing non-disclosure agreement,” MSP’s spokesperson, Diana Diaz, told the Herald Saturday.

https://www.miamiherald.com/news/business/article311902272.html