Bankrupt Restaurant Chain's CEO Looted Funds For Trips, Jets, Lenders Allege

A group of lenders to bankrupt dining chain FAT Brands Inc. has alleged that the company's chief executive officer "looted" the business to fund vacations, jewelry and private jets.

Creditors who own most of the $1.2 billion FAT Brands raised in whole-business securitization accused Andrew Wiederhorn in a Tuesday court filing of misappropriating lenders' cash. The company allegedly made more than $200 million in "improper payments" before filing Chapter 11 earlier this week, lenders claimed, citing dividends and bonuses to corporate insiders as well as costs associated with defending Wiederhorn in litigation.

The lenders repeated many of the allegations leveled against Wiederhorn in a 2024 indictment before federal prosecutors changed course last year and dropped a criminal case against him. Now, the creditors are demanding that a bankruptcy judge appoint an independent trustee to run key affiliates of FAT Brand

s, which they say was dominated by Wiederhorn and his family prior to the Chapter 11 filing. 

"As we have maintained from the very beginning, these allegations are entirely false and have no basis in fact," a FAT Brands spokesperson said in response to lenders' filing. Lawyers for Wiederhorn did not return emails seeking comment. 

The names of the individual lenders challenging the bankruptcy couldn't immediately be learned. FAT Brands is scheduled to appear in bankruptcy court later on Wednesday. 

FAT Brands operates about 2,200 restaurant locations in the US under 18 different brands, including Fatburger, Johnny Rockets and Twin Peaks. Lenders want a judge to appoint a trustee to oversee FAT Brands units connected to debt they own because they say Wiederhorn can't be trusted.

FAT Brands said in court papers that management fees it received on its securitization vehicles didn't cover the cost of operating its business. The company said its debt service obligations became "increasingly unsustainable" because of ratcheting penalties, adding that the business struggled with inflationary pressures that have stressed other casual restaurant brands.

Creditors disputed FAT Brands' assessment of its bankruptcy, calling the company's description "a fairytale." They said the company generated enough income to cover operating expenses and alleged that FAT Brands is short on cash because Wiederhorn used company funds to subsidize his "extravagant lifestyle."

The bankruptcy comes months after federal prosecutors dropped corporate fraud charges against Wiederhorn - a donor to President Donald Trump - who was accused of hiding $47 million from the Internal Revenue Service. The US Securities and Exchange Commission also reached a deal late last year to resolve allegations that Wiederhorn used nearly $27 million of FAT Brands' cash between October 2017 and March 2021 on private jets, luxury vacations and other personal expenses.

Lenders on Tuesday cited the government cases along with civil lawsuits, saying FAT Brands covered nearly $86 million in defense costs for Wiederhorn and other directors and officers indemnified by the company. Before FAT Brands appointed a special board committee ahead of its Chapter 11 filing, lenders claimed six of its 13 board members were a part of Wiederhorn's family, "giving him total control over the board."

Wiederhorn plead not guilty to the criminal charges. His lawyers have said Wiederhorn built his restaurant business after he was released from prison in 2005. He had plead guilty to filing a false tax return and another felony charge in an earlier prosecution, which lenders also cited in Tuesday's filing.

Last month, lenders proposed an alternative bankruptcy process that would have mandated appointment of independent managers and a chief restructuring officer who wouldn't report to Wiederhorn. But the creditors claimed FAT Brands "refused meaningful engagement" with its group and instead are embarking on a bankruptcy that seeks the non-consensual use of creditor cash.

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