Jay Clayton, U.S. Attorney for the Southern District of New York | Department of Justice
Federal prosecutors have charged Patrick James, founder and former CEO of First Brands Group, LLC, and his brother Edward James, a former senior executive at the company, with multiple counts including conspiracy to commit wire fraud and bank fraud, money laundering, and managing a continuing financial crimes enterprise. The indictment alleges that the two brothers engaged in fraudulent activities over several years that ultimately led to the bankruptcy of First Brands in September 2025.
First Brands was an automotive aftermarket parts supplier with approximately $5 billion in annual sales before its collapse. When it filed for bankruptcy, the company reported only $12 million in cash against more than $9 billion in liabilities. Prosecutors state that lenders and creditors now face billions of dollars in losses as a result of these alleged schemes.
Patrick James and Edward James were arrested in Ohio and are expected to appear before a judge in the Northern District of Ohio. U.S. District Judge Analisa Torres has been assigned to oversee the case.
Also unsealed was the guilty plea of Peter Andrew Brumbergs for his role in the scheme. Brumbergs pleaded guilty on January 26, 2026, before Judge Torres and is cooperating with authorities.
“As alleged in the indictment, Patrick James, together with his brother, Edward James, perpetrated a staggering fraud at First Brands Group,” said U.S. Attorney Jay Clayton. “The James brothers obtained billions for First Brands—and millions for themselves—by presenting their lenders with the impression of a successful, growing international business. The indictment and the guilty plea unsealed today describe a very different reality: a business run through fraud, fake documents, and false financials. Together with our law enforcement partners, we will continue working tirelessly to uncover every aspect of this fraud and vindicate the rights of every victim.”
U.S. Attorney David M. Toepfer stated: “Individuals who lie about the financial health of their company for the purposes of greed create shockwaves across the business sector that endanger the economic wellbeing of others. The fallout from selfish and deceptive actions—such as those alleged in this case—can cascade down to honest and hardworking company employees based right here in Ohio. Their jobs and livelihoods are at stake due to the corrupt actions of a few individuals. Together with our federal partners, we will seek justice on behalf of all victims affected by this travesty.”
“These executives allegedly inflated invoices, double- and triple- pledged collateral, and falsified financial statements to unlawfully trick lenders into giving them billions of dollars,” said FBI Assistant Director in Charge James C. Barnacle Jr. “Not only did their alleged deceit exploit the integrity of our financing system, they also betrayed the trust of the companies funding First Brands by mispresenting their business’s financial position. The FBI will never cease its pursuit of fraudsters seeking to manipulate financial institutions for greedy gains.”
“HSI remains ever vigilant to detect money laundering and financial fraud schemes that undercut fair and honest business practices, especially one like this which allegedly contributed to billions in losses,” said HSI Detroit Acting Special Agent in Charge Jared Murphey. “HSI special agents, alongside our FBI and IRS partners remain committed to enforcing the rule of law and ensuring justice for victims. As law enforcement we have a solemn responsibility to protect the integrity of our financial system and hold violators accountable.”
Executive Special Agent Kareem Carter added: “The defendants operated First Brands as a ‘Ponzi’ scheme in which new loan proceeds were used to pay back old lenders and fund their extravagant lifestyle... Today’s announced indictment... demonstrates IRS-CI special agents’... commitment to investigate prosecute... criminals who allegedly defraud banks... out of billions... I would like to thank our Global Illicit Financial Team for their vigilant professional dedicated pursuit..."
According to prosecutors' allegations detailed in court documents unsealed today:
From around 2018 through 2025 Patrick James founded First Brands while Edward James served as Senior Vice President; both orchestrated multiple fraudulent schemes involving fake or inflated invoices sold as valid receivables; double-pledged collateral; falsified corporate statements; concealed significant liabilities; secured billions from lenders using these methods; personally profited by millions.
To support growth-through-acquisition strategies they deceived factoring partners (companies buying accounts receivable) by submitting fake or altered invoices—sometimes generating invoices for non-existent transactions or inflating values—to secure advance funds which were then used internally or diverted via so-called "round trips" or "corporate initiatives." They also provided misleading information about accounts payable.
Additionally they misled primary lenders by distributing manipulated internal statements ("bridge" files) showing altered versus accurate finances; hid off-balance-sheet debt incurred through inventory-financing arrangements using entities owned by Patrick James (the "James Entities"), designed specifically not to appear on official balance sheets but routed back into operating accounts disguised as ordinary receipts rather than loans.
When attempts at refinancing or selling failed amid mounting liabilities—the company filed bankruptcy on September 28th 2025.
Even during collapse Patrick James continued benefiting personally from funds brought into First Brands via these fraudulent activities.
A chart attached lists names ages residences charges maximum penalties per defendant—with sentences ranging up to life imprisonment depending on count—for informational purposes only pending judicial determination upon conviction.
U.S Attorney Clayton praised work done by FBI IRS-CI HSI teams involved along with Northern Ohio Money Laundering Task Force staffers prosecuting through Securities & Commodities Fraud Task Force led by Assistant United States Attorneys Nicholas W Chiuchiolo Marguerite B Colson Peter J Davis Sarah Mortazavi Special Assistant Michael L Collyer.
The indictment notes all facts described are considered allegations until proven otherwise.
