U.S. federal prosecutors have charged Patrick James, founder and former CEO of bankrupt auto parts supplier First Brands Group, and his brother Edward James, a former senior executive, with multiple federal crimes — including bank fraud, wire fraud, money laundering conspiracy and related offenses — in connection with what the U.S. Department of Justice alleges was a multibillion-dollar scheme to defraud lenders and financing partners.

An indictment unsealed Jan. 29 in the U.S. District Court for the Southern District of New York accuses the James brothers of orchestrating a years-long fraudulent financing strategy that artificially inflated the company’s financial health and secured billions of dollars in loans under false pretenses. Prosecutors allege the pair used fake or inflated invoices and falsified financial statements to conceal liabilities and mislead lenders about the company’s true condition — allowing First Brands to borrow repeatedly against the same collateral and obtain financing it would not have otherwise secured.

According to the charges, the alleged scheme involved pledging the same assets multiple times for different loans, using phony accounts receivable as financing collateral, and obscuring substantial debts from lenders and financing partners. A cooperating former senior finance executive, Peter Andrew Brumbergs, has pleaded guilty and is assisting authorities.

Patrick James resigned from First Brands in October 2025.

Prosecutors characterize the operation as akin to a Ponzi scheme in which proceeds from new lenders were used to repay earlier creditors and to fund an extravagant lifestyle for the James brothers, including personal expenditures on luxury real estate and high-end vehicles — allegations both defendants deny.

Both James brothers were arrested in Ohio Thursday and are expected to appear in court there. Patrick James faces an additional count, accusing him of managing a continuing financial crimes enterprise.

The indictment follows First Brands’ highly publicized Chapter 11 filing in September 2025, which stunned markets and lenders when the company disclosed multibillion-dollar liabilities far exceeding prior disclosures. Just three days before the indictment news, the bankrupt supplier announced it would wind down several key brands including Brake Parts, Cardone and Autolite after failing to secure additional financing or complete sales — a move that underscored the company’s deteriorating financial condition.

The fallout from First Brands’ collapse has rippled through parts of the automotive aftermarket and financing markets, prompting inquiries from lenders and investors about risk assessment practices tied to supply-chain financing and other off-balance-sheet arrangements.

Patrick and Edward James remain free pending further court proceedings; both have denied wrongdoing.