"All of us have worked in earnest on the transaction to purchase the assets of The Weinstein Company," Maria Contreras-Sweet said.
"However, after signing and entering into the confirmatory diligence phase, we have received disappointing information about the viability of completing this transaction. As a result, we have decided to terminate this transaction."
The studio's "disappointed" board of directors responded by saying they would now pursue "an orderly bankruptcy process" while working "tirelessly" to see if there are any other viable options.
A source familiar with the deal told AFP on condition of anonymity that the buyers discovered for the first time Tuesday $64 million in undisclosed liabilities. The Contreras-Sweet group's bid for the company had been reported at $500 million.
The breakdown was the latest dramatic twist in a long-running saga over the future of the New York-headquartered film studio, which has teetered on the brink of bankruptcy since Weinstein was hit by sexual assault allegations, torpedoing his career last October.
"The investors' excuse that they learned new information about the company's financial condition is just that an excuse," said The Weinstein Company board in a tersely-worded statement.
"The company has been transparent about its dire financial condition to the point of announcing its own LIKELY bankruptcy last week. We regret being correct that this buyer simply had no intention of following through on its promises."
Contreras-Sweet's bid to buy the production house hit a first snag last month when New York state attorney general Eric Schneiderman sued The Weinstein Company, fearing that imminent sale could leave victims of the mogul's alleged sexual misconduct without adequate redress.
Schneiderman has stipulated that any deal provide adequate compensation for victims, protect employees and remove executives who had been complicit in Weinstein's misconduct.
The attorney general's office said it would be "disappointed if the parties cannot work out their differences and close the deal."
But Contreras-Sweet, a Mexican immigrant who headed the Small Business Administration under Barack Obama, left open the possibility that she could still forge a new company from the ashes.
"I believe that our vision to create a women-led film studio is still the correct course of action," she said.
"To that end, we will consider acquiring assets that may become available in the event of bankruptcy proceedings, as well as other opportunities that may become available in the entertainment industry."
Contreras-Sweet has previously said her intention was to have a majority female board, save jobs and create a victims' compensation fund.
The fate of several finished movies, which have languished on the shelf since Weinstein's career imploded, with no release dates announced, is now more unclear than ever.
They include historical drama "The Current War," starring Benedict Cumberbatch as Thomas Edison, "Mary Magdalene," a religious drama starring Rooney Mara, and "The War With Grandpa," a comedy starring Robert De Niro.
Weinstein was sacked as chairman in October after bombshell exposes accused him of years of sexual harassment, assault and even rape.
More than 100 women have since accused him of impropriety going back 40 years, triggering a US reckoning over harassment and abuse that has toppled a litany of powerful men in various sectors.
Weinstein, a twice-married father of five, is being investigated by British and US police, but has not been charged with any crime. He denies having non-consensual sex and is reportedly in treatment for sex addiction.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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