Argon Credit has been in the news recently for their attempt to enter a Chapter 11 debtor-in-possession controlled bankruptcy. In addition, a source has in the past informed us of numerous improprieties at Argon Credit, including of an ongoing FBI investigation for fraud.
As a natural next step, Argon Credit has now entered a Chapter 7 bankruptcy through an order of the courts of Illinois. The entire order can be found here: Argon auto stay-convert & appoint a trustee.
Furthermore, in the case between Princeton Alternative Income Fund and Argon credit the same judge rejected Argon’s request to allow Argon to use their cash. In other words, it appears that Argon was unable to prove their need to access their cash well enough or credible enough. The order can be found here: argon deny cash
In a Chapter 7 proceeding, a court-appointed received will be taking control of the company. The receiver will first start by inventorying the assets of the company. He or she will then proceed with investigating if there were any assets alienated from the company against the fiduciary duties of the officers or through any sort of malfeasance in order to claw back and increase the assets available for the creditors to share. And once all the possible assets collected, sometimes through lawsuits, the resulting proceeds will be distributed in order of priority, starting with preferred creditors all the way to equity holders. This process usually takes a few years and rarely will the creditors recoup more than 20 to 30 cents on the dollar.
The failure of Argon Credit underlines once again the need for good due diligence, good controls and the assessing of the credibility of the officers of a company before any investment. I would believe the mistakes, in this case, were mostly done by the investors who did insufficient due diligence on the company officers and put insufficient controls on their investments.