By: Matthew Termine, Sam Koppelman

Editor: Vikas Kumar

Based on Hunterbrook Media’s reporting, at the time of publication Hunterbrook Capital is long $CVNA. Positions may change at any time. This article is not investment advice or any recommendation. See full disclosures on our website.

Mark Walter may need billions of dollars. But one of the sources of cash investors assumed he might tap — his enormous Carvana stake — may not be sellable right now.

Delaware UCC filings obtained by Hunterbrook on Tuesday show that Citigroup Global Markets filed UCC financing statements and amendments through which Citi has a presently effective security interest in assets held by CVAN Holdings Sub I, LLC, where TWG holds essentially its entire Carvana position. A UCC financing statement is a public notice filed with a state, here Delaware, through which a lender perfects its security interest in pledged collateral.

The results of a Delaware UCC search on CVAN Holdings Sub I, LLC, the entity that holds Mark Walter’s $2 billion stake in Carvana. The filings show two separate security interests in the Carvana shares held within the entity, one of which is still active and the other terminated as of July 3, 2025.

Citigroup amended the financing statement on June 23, less than two months ago, specifically to account for shares created by Carvana’s recent five-for-one stock split.

‍The finding complicates a growing bear case against Carvana: that Walter, suddenly desperate for liquidity amid federal scrutiny of his sprawling business empire, could dump his massive Carvana position into the market.

He can’t simply do that — at least not without Citigroup Global Markets Inc. releasing the collateral.

The collateral is pledged to Citigroup Global Markets Inc. Selling it would generally require satisfying the secured obligations, obtaining Citi’s consent, or otherwise negotiating a release of the collateral. And the lien expressly extends beyond the shares themselves to proceeds and other assets.

Citi could of course sell the shares if, for example, an event of default were triggered under the facility’s terms, which remain largely undisclosed. But there is reason to believe that at least some of the borrowing or pre-payment pursuant to forward contracts occurred in connection with Walter’s purchase of a majority interest in the Lakers. And he just agreed to sell his Lakers stake to a group including Bob Iger and Joshua Kushner. Is Citi likely to sell these shares when a significant Walter liquidity event is pending?

Carvana shares were down more than 7% again Tuesday after a sharp decline Monday. Walter and TWG’s post-split core position represents approximately 30 million Carvana shares, worth roughly $2 billion at Tuesday morning prices.

But $2 billion is the gross market value, not necessarily available liquidity for Walter.

That distinction suddenly matters.

The Wall Street Journal reported Monday that Walter “drew on loans from insurers to invest in startups,” including Carvana and Beyond Meat. The revelation comes as federal prosecutors and the SEC investigate whether Walter or his companies committed fraud by concealing financial connections while borrowing billions from insurers he controlled. Walter and his businesses have not been charged with crimes. TWG — Walter’s holding company — has said it acted in good faith and denied attempting to circumvent its obligations.

Walter is now racing to raise money and unwind insurer-related investments. That has naturally raised the question of whether his publicly traded holdings could be sold for cash.

The Delaware records show the answer, at least for Carvana, is considerably more complicated.

CITI’S CLAIM COVERS THE WHOLE CORE STAKE

Walter’s filings with the SEC had already provided a clue.

They said CVAN Holdings Sub I had pledged all of its Carvana LLC units and corresponding 5,995,376 Class B shares to secure “one or more prepaid variable forward sale contracts and certain margin loans with an unaffiliated third party.” Walter ultimately controls the TWG entities above CVAN Sub.

What the SEC filing did not reveal was the identity of that third party — or whether the pledge remains live today.

The Delaware records answer both questions much more clearly.

The secured party is Citigroup Global Markets Inc., acting as agent for Citibank, N.A. The original financing statement dates to December 22, 2023. It was amended in February 2024, July 2025 and, critically, June 23, 2026.

That most recent amendment came after Carvana’s five-for-one stock split. Citi updated its collateral description to expressly capture the additional shares issued in the split, bringing the pledged Class B position to approximately 30 million post-split shares.

That is powerful evidence that the pledge was not merely a stale artifact from an old Walter financing.

Someone was actively maintaining Citi’s security interest this summer.

THERE WAS ALSO A MARGIN LOAN

A second UCC filing reveals more.

On May 10, 2024, Citibank filed a separate financing statement against CVAN Holdings Sub I. Its collateral schedule refers explicitly to a “Margin Loan Agreement” dated May 10, 2024, among CVAN Sub as borrower, multiple lenders, and Citibank as administrative agent. Citigroup Global Markets served as custodian for the collateral account.

That filing was terminated on July 3, 2025.

But the timing is notable: One day earlier, on July 2, Citi amended and expanded its other, still-active financing statement to cover 5,995,376 Carvana shares (pre-split).

And six weeks later, Walter’s SEC filing still said the entire position secured both “prepaid variable forward sale contracts” and “certain margin loans.”

That sequence suggests the financing may have been restructured or consolidated rather than simply paid off — though the UCC records alone cannot prove that.

Notably, Citi then returned in June to update the still-active lien for Carvana’s stock split.

WHAT THIS MEANS FOR CARVANA

For traders, there are two very different risks tied to Walter.

The first is the one currently worrying the market: Walter voluntarily dumps tens of millions of CVNA shares because he needs cash.

These filings make that scenario look substantially less straightforward.

Walter and TWG do not appear to control an unencumbered $2 billion block that he can simply sell and redeploy elsewhere. Citi already has a claim against essentially the entire core stake. A sale could still happen, but it would have to be coordinated with the secured financing structure, with some portion of the proceeds potentially going first to satisfy Citi or the forward counterparties.

That should reduce the simplistic near-term “Walter needs cash, therefore 30 million shares are for sale” overhang.

But there is a second risk.

If Walter’s obligations to Citi become stressed, Citi itself could have rights over the collateral.

The filings do not disclose the requisite loan-to-value ratio, margin-call threshold, maturity dates, or current exposure under Walter’s prepaid forward contracts. The filings provide no evidence that Citi is currently forcing — or even considering — a sale of Carvana shares.

A UCC filing also does not prove how much debt is presently outstanding.

Still, the newly obtained records change the picture materially.

Walter’s Carvana position looks less like a $2 billion piggy bank he can raid to solve his liquidity crunch and more like a $2 billion pool of collateral over which Citi already holds influence.

TWG and Carvana did not immediately respond to Hunterbrook’s request for comment. Citi declined to comment.

AUTHOR

Matthew Termine is a former corporate lawyer with significant experience advising companies operating within regulated industries. Matt led Hunterbrook’s investigation and reporting on United Wholesale Mortgage. In 2017, Matt was credited by the Wall Street Journal, among others, for identifying suspicious mortgage loan transactions that led to several successful criminal prosecutions, including that of a prominent political operative and the chief executive officer of a federally chartered bank. He is a graduate of Trinity College and Fordham University School of Law.

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life. Sam is based in New York City.

EDITOR

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor’s from Emory University. Vikas is based in Maryland.

DISCLOSURES

© 2026 Hunterbrook Media LLC. All rights reserved. Use of this website is strictly governed by our Terms of Use. The content herein is furnished on an “AS IS” basis without any form of express or implied warranty. For information regarding our privacy practices, please refer to our Privacy Policy.

Hunterbrook Media LLC (”Hunterbrook Media”) is an investigative news organization. Hunterbrook Media is affiliated with Hunterbrook Capital LP (”Hunterbrook Capital”), an exempt reporting adviser with the U.S. Securities and Exchange Commission that serves as investment adviser to one or more investment funds. Hunterbrook Media and Hunterbrook Capital are legally separate entities under common control. Hunterbrook Capital’s investment activities are one source of funding for Hunterbrook Media’s journalistic operations. Hunterbrook Capital may hold long positions, short positions, positions through derivative instruments including options and swaps, or no position in any security covered or mentioned on this website. Consistent with applicable policies and procedures, Hunterbrook Capital may establish, modify, or close positions in covered securities before or after the publication of any Hunterbrook Media article. Following publication of any article, Hunterbrook Capital will continue transacting in covered securities for an indefinite period and may be long, short, or flat at any time thereafter, regardless of any position described at publication. Hunterbrook Media has no obligation to update any article or disclosure to reflect subsequent changes in Hunterbrook Capital’s positions.

Nothing on this website constitutes investment advice, a recommendation to buy, hold, or sell any security, or a solicitation to purchase or sell any securities. No securities shall be offered or sold in any jurisdiction where such activities would be contrary to applicable securities laws. Hunterbrook Media is not a registered investment adviser in the United States or any other jurisdiction. Nothing herein should be construed as investment advice or a recommendation of any kind. This information should not be relied upon as a substitute for independent research or professional financial, legal, or tax advice.

This website may feature forward-looking statements reflecting Hunterbrook Media’s current views. Such statements, identifiable by terms including but not limited to “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “should,” and “will,” are inherently speculative and subject to risks and uncertainties. Actual results or outcomes may substantially deviate from those projected. Hunterbrook Media expressly disclaims any obligation to update or revise any forward-looking statements, regardless of subsequent developments or new information.

The information presented is current as of the date indicated. No representation regarding the completeness or timeliness of this information is made. Some information is sourced from third parties and, while believed to be reliable, has not been independently verified, and its accuracy or completeness is not guaranteed. Hunterbrook Media is not affiliated with any sites linked to this website. Investment in securities and other financial instruments involves significant risk, including the potential loss of principal. Users are advised to conduct their own due diligence and consult professional advisors before engaging in any investment activity. Use of Hunterbrook Media’s content is entirely at the user’s risk. Users shall not use this site for any illegal or prohibited purposes and shall comply with all applicable local, state, national, and international laws and regulations.

Should any provision of these Terms of Use be adjudged invalid or unenforceable, the remaining provisions shall remain in full force and effect. Trademarks contained in links to third-party websites belong to their respective owners. Hunterbrook Media retains copyright on all text, content, graphics, and trademarks displayed on this site.

By: Matthew Termine, JD Jean-Jacques

Editor: Sam Koppelman

Based on Hunterbrook Media’s reporting, at the time of publication Hunterbrook Capital is short bonds issued by Sammons Financial Group. Positions may change at any time. This article is not investment advice or any recommendation. See full disclosures on our website.

Even for journalists investigating the sprawling Walter saga, the divestment announcement came out of left field.

The Sammons conglomerate, which has owned a big stake in Mark Walter’s business since before it even bore the name Guggenheim, says it’s leaving the stadium after three decades.

This comes as Walter, billionaire owner of the Los Angeles Dodgers, has embarked on rapid sales for liquidity amid a federal probe into how his life insurers disclose investments. After he agreed to sell his majority stake in the Los Angeles Lakers last week, the FT reported he’s also exploring the sale of his stake in Chelsea Football Club. He even reportedly offered his Guggenheim shares as collateral to resolve holes in the balance sheets of insurers owned by The Walter Group (TWG), which back life insurance policies held by millions of Americans.

Hunterbrook Media reported on Sunday that Sammons cut Guggenheim from its disclosures the year before federal agents seized devices from Walter and another Guggenheim executive.

The removal of Guggenheim from the Sammons filings conflicted with Guggenheim’s latest filings. Guggenheim still calls Sammons a related party, its largest stakeholder, and its largest source of fees. Guggenheim also invests money from Sammons life insurers. Despite all of this ongoing business, Sammons claims Guggenheim is unaffiliated.

The day after Hunterbrook published its investigation, Bloomberg reported that Sammons bonds quickly sank to an all-time low. Hours later, Bloomberg also reported on a 20% drop in a term loan by Guggenheim’s GIH Borrower LLC.

BONDS ISSUED BY SAMMONS FINANCIAL GROUP DECLINED TO ALL-TIME LOW ON AUGUST 17:

Hunterbrook didn’t report weaknesses in the assets underlying the bonds from either Sammons or Guggenheim, but did detail a web of undisclosed or notable ties between the firms and their affiliates. Hunterbrook also discovered the use of Sammons life insurance money to fund assets owned by Walter’s TWG investments, including a bull-riding team, through a Guggenheim-managed investment vehicle.

Representatives of AM Best, the agency that assigned Sammons Financial’s bonds an “‘a-’ (Excellent)” rating in June, declined to comment when reached by phone on Monday, but directed Hunterbrook over email to its webpage on how it views and analyzes affiliated and non-affiliated investments. Another Sammons rating agency, Fitch did not respond to a request for comment.

But last night, Sammons Financial and its parent Sammons Enterprises chimed in, after not acknowledging repeated requests for comment leading up to the first Hunterbrook article.

Sammons did not refute the facts of Hunterbrook’s reporting. The conglomerate clarified several distinctions about its entities and emphasized that it “is a separate and independently managed organization” from “Guggenheim and certain of its affiliates.” The conglomerate also claimed that “Sammons, its officers, directors, and employees are not under investigation.”

Then Sammons announced, for the first time, that it “has been divesting over the past several years” from Guggenheim Capital, the parent company of several Guggenheim affiliates, including entities that have managed Sammons life insurance assets for many years.

A Guggenheim spokesperson declined to comment on the divestment. A Guggenheim executive said they had not heard of it.

The largest owner of an asset management giant beginning to divest its stake after 30 years of partnership would have been news on a regular Monday — even if that owner hadn’t also invested roughly a hundred billion dollars with that asset manager. As Guggenheim’s CEO is in a federal investigation and offloading assets, this marks Guggenheim’s largest stakeholder and CEO both simultaneously raising cash.

At the same time, key statements by Sammons and Guggenheim directly contradict each other.

Sammons — on behalf of Sammons Financial and its parent company Sammons Enterprises — claimed in its new announcement: “We are not affiliated with Guggenheim Capital LLC.” It also affirmed it “owns a non-voting and non-controlling, minority interest in Guggenheim Capital.”

But a May filing by Guggenheim Investments Private Credit Fund disclosed, in contrast, that:

“Sammons Enterprises, Inc., a diversified company with several insurance company subsidiaries (together with its subsidiaries, “Sammons”), holds indirect economic and voting interests in Guggenheim Capital, LLC (“Guggenheim Capital”), the Adviser’s ultimate parent company. As a result of its ownership stake in Guggenheim Capital, Sammons is the largest individual stakeholder of the Adviser. Certain of Sammons’ wholly owned insurance company and other subsidiaries are advisory clients of, and pay fees to, the Adviser. As a result, Sammons is the largest individual source of annual advisory fees paid to the Adviser. Sammons also has other relationships with the Adviser and various Guggenheim Entities.”

Is Guggenheim correct that Sammons owns “voting interests” in Guggenheim Capital, or is the Sammons conglomerate correct that it “owns a non-voting” interest in Guggenheim Capital?

Even more recently, a July 30 filing by Guggenheim Partners Investment Managements (GPIM) identifies the Sammons Enterprises vehicle called Sage Assets as a “Control Person,” because it can appoint representatives to Guggenheim Capital’s executive committee. GPIM also lists Sammons Financial’s life insurers as “related persons.” (TWG not disclosing related parties is reportedly what catalyzed the federal investigation).

And a March 31 filing by Guggenheim Private Investments (GPI; not GPIM) similarly identifies Sammons Enterprises as an “indirect substantial owner,” as well as a “significant individual source of annual advisory fees” paid to one of GPI’s affiliates and also a “primary lender.”

So one of Sammons or Guggenheim — which each manage hundreds of billions of dollars — seems to be wrong, unless the voting interests were zeroed after May 7, or Sammons and Guggenheim are using different definitions of control and voting interests.¹ Sammons and Guggenheim could not immediately be reached for clarification.

Sammons also claimed on Monday that Sammons Enterprises has no “ability to control, Guggenheim Capital LLC, TWG Global Holdings LLC, nor any of their affiliates.” However, that “ability to control” may be a technical or even strictly semantic distinction.

Because in addition to the “Control Person” July filing by Guggenheim, Sammons is the largest stakeholder in Guggenheim and “the largest individual source of annual advisory fees” paid to Guggenheim. Sammons buys loans structured by Guggenheim. Sammons is a “primary lender in a facility that provides leverage” to a fund advised by Guggenheim Private Investments. And it has life insurance money invested in a Mark Walter rodeo investment held via TWG and managed by Guggenheim.

HOW IT ALL TIES TOGETHER & WHERE SAMMONS MAY BE UNTYING

Is Sammons divesting its ownership in Guggenheim, or also its roughly one hundred billion dollars in life insurance assets managed by Guggenheim?

And if Sammons is divesting both its ownership and its fund investments, what does that mean for the value of Mark Walter’s stake — which he offered to pledge as collateral to meet life insurance loans at the center of the federal investigation?

In the new statement, Sammons now highlights diversification where it used to highlight Guggenheim’s role as its “core manager” of life insurance assets. Sammons says it’s now “utilizing more than 15 independent, third-party investment managers.”

Sammons doesn’t, however, identify what percentage of its assets each of those firms manages. As of 2023, according to Sammons audited financials, Guggenheim was running 87% of its investment portfolio, about $100 billion dollars.

That percent going down would enable Sammons to tell regulators and insurance policyholders it’s diversifying risk and reducing reliance on affiliated investors at a time when affiliations (or claims to the contrary) are under federal scrutiny.

But that same diversification would be tough news for Guggenheim, and for Walter.

And it certainly looks like the relationship between the two entities is changing. In every filing from 2023 through March 2025, Guggenheim’s SEC ownership schedules listed Sammons’ holding entity, Sage Assets, as a 25%-50% owner and “control person.” Then, in May 2025, the Sammons chain was removed: Guggenheim described a “change in the ownership structure of Guggenheim Capital, LLC by SAGE Assets, Inc. falling below 25%.”

This could be a result of the divestiture or of Sammons renouncing their voting rights.

The truth will be revealed in time. For now, it’s quite the rodeo.

AUTHORS

Matthew Termine is a former corporate lawyer with significant experience advising companies operating within regulated industries. Matt led Hunterbrook’s investigation and reporting on United Wholesale Mortgage. In 2017, Matt was credited by the Wall Street Journal, among others, for identifying suspicious mortgage loan transactions that led to several successful criminal prosecutions, including that of a prominent political operative and the chief executive officer of a federally chartered bank. He is a graduate of Trinity College and Fordham University School of Law.

JD Jean-Jacques joined Hunterbrook from Goldman Sachs, where he worked as an investment banker. He was editor-in-chief of Howard University’s newspaper, The Hilltop, and wrote for The Exonian at Phillips Exeter Academy. Among other recognitions, JD was a White House Correspondents’ Association Scholar and was named Student Journalist of the Year by The National Association of Black Journalists. He graduated from Howard with a B.A. in history.

EDITOR

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life. Sam is based in New York City.

Nathaniel Horwitz contributed reporting.

DISCLOSURES

© 2026 Hunterbrook Media LLC. All rights reserved. Use of this website is strictly governed by our Terms of Use. The content herein is furnished on an “AS IS” basis without any form of express or implied warranty. For information regarding our privacy practices, please refer to our Privacy Policy.

Hunterbrook Media LLC (”Hunterbrook Media”) is an investigative news organization. Hunterbrook Media is affiliated with Hunterbrook Capital LP (”Hunterbrook Capital”), an exempt reporting adviser with the U.S. Securities and Exchange Commission that serves as investment adviser to one or more investment funds. Hunterbrook Media and Hunterbrook Capital are legally separate entities under common control. Hunterbrook Capital’s investment activities are one source of funding for Hunterbrook Media’s journalistic operations. Hunterbrook Capital may hold long positions, short positions, positions through derivative instruments including options and swaps, or no position in any security covered or mentioned on this website. Consistent with applicable policies and procedures, Hunterbrook Capital may establish, modify, or close positions in covered securities before or after the publication of any Hunterbrook Media article. Following publication of any article, Hunterbrook Capital will continue transacting in covered securities for an indefinite period and may be long, short, or flat at any time thereafter, regardless of any position described at publication. Hunterbrook Media has no obligation to update any article or disclosure to reflect subsequent changes in Hunterbrook Capital’s positions.

Nothing on this website constitutes investment advice, a recommendation to buy, hold, or sell any security, or a solicitation to purchase or sell any securities. No securities shall be offered or sold in any jurisdiction where such activities would be contrary to applicable securities laws. Hunterbrook Media is not a registered investment adviser in the United States or any other jurisdiction. Nothing herein should be construed as investment advice or a recommendation of any kind. This information should not be relied upon as a substitute for independent research or professional financial, legal, or tax advice.

This website may feature forward-looking statements reflecting Hunterbrook Media’s current views. Such statements, identifiable by terms including but not limited to “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “should,” and “will,” are inherently speculative and subject to risks and uncertainties. Actual results or outcomes may substantially deviate from those projected. Hunterbrook Media expressly disclaims any obligation to update or revise any forward-looking statements, regardless of subsequent developments or new information.

The information presented is current as of the date indicated. No representation regarding the completeness or timeliness of this information is made. Some information is sourced from third parties and, while believed to be reliable, has not been independently verified, and its accuracy or completeness is not guaranteed. Hunterbrook Media is not affiliated with any sites linked to this website. Investment in securities and other financial instruments involves significant risk, including the potential loss of principal. Users are advised to conduct their own due diligence and consult professional advisors before engaging in any investment activity. Use of Hunterbrook Media’s content is entirely at the user’s risk. Users shall not use this site for any illegal or prohibited purposes and shall comply with all applicable local, state, national, and international laws and regulations.

Should any provision of these Terms of Use be adjudged invalid or unenforceable, the remaining provisions shall remain in full force and effect. Trademarks contained in links to third-party websites belong to their respective owners. Hunterbrook Media retains copyright on all text, content, graphics, and trademarks displayed on this site.

BY: Sam Koppelman, Matthew Termine, JD Jean-Jacques

EDITOR: Vikas Kumar

Guggenheim CEO Mark Walter just agreed to sell the Lakers for liquidity after the Feds seized his phone and computer amid a probe into life insurers he owns.

Meanwhile, Guggenheim’s largest shareholder — the conglomerate Sammons, which owns $130 billion of life insurance assets largely managed by Guggenheim — has stayed out of the spotlight, even as its own CEO announced retirement this month.

How? In 2024, Sammons restructured its Guggenheim stake and stopped classifying the firm as a related party, even as it retained a huge stake and continued investing billions through Guggenheim vehicles. That is strikingly similar to the disclosure issue now drawing federal scrutiny to Walter.

Caught in the middle: Sammons policyholders across the country, whose insurance money has flowed into Walter-linked businesses — including the insurers under federal investigation and, apparently, a professional bull-riding team.

Sammons and Guggenheim did not respond to repeated requests for comment.‍

Nick Nemeth of Mispriced Assets and Hunterbrook Media reporter-at-large Bethany McLean contributed reporting.

Based on Hunterbrook Media’s reporting, at the time of publication Hunterbrook Capital is short bonds issued by Sammons Financial Group. Positions may change at any time. This article is not investment advice or any recommendation. See full disclosures on our website.

Shaq and Kobe. Magic and Kareem. Feds and warrants.

In the golden age of grift and graft, it’s not every day FBI agents stake out a private jet to seize a phone and laptop from a billionaire. But last year, on a Chicago tarmac, that’s exactly what they did, targeting devices belonging to Mark Walter.

Walter is the CEO of financial giant Guggenheim, as well as the owner of the Los Angeles Dodgers, the Los Angeles Lakers, and now, quite a few legal bills.

Last week, Walter agreed to sell the Lakers to Josh Kushner and Bob Iger for a record $12.5 billion, less than a year after closing on the team for $10 billion. It’s among the richest, quickest flips in NBA history. $2.5 billion! In a year!

ESPN credulously framed it as an offer Walter couldn’t refuse, claiming he was not “looking to sell.”

But that didn’t make sense. You buy the Lakers because you want to own the Lakers. If you sell the Lakers just a year later, it’s probably because you have to.

Sure enough, Bloomberg quickly reported what really drove the deal: Walter’s holding company was raising cash “to help pay down loans on the books of its insurers that had drawn scrutiny from the Justice Department.” The FT then broke news that the president of Guggenheim Investments “had her phone seized by the FBI” on the same day as Walter’s.

The insurers tied to the probe — Delaware Life and Clear Spring Life and Annuity, the life insurance arm of The Walter Group (TWG) — received grand jury subpoenas after a whistleblower report. The companies then restated their financials to disclose that their respective investment portfolios were significantly more intertwined with Walter and TWG than they had initially disclosed.

But as Delaware Life and Clear Spring Life and Annuity have been taking heat, one player very close to all this has managed to avoid scrutiny: Sammons.

As of 2021, the conglomerate owned roughly a third of Guggenheim. Sammons paid the firm tens of millions each year for managing tens of billions of dollars of Sammons life insurance money, according to its 2023 filing. Sammons even buys Guggenheim loans in circular transactions that smell like a Proustian madeleine from 2008.

But Sammons hasn’t been included in the coverage of the Walter scandal yet.

One potential explanation: In 2024, before subpoenas hit Walter’s insurers, Sammons restructured. It renounced its voting shares in Guggenheim, enabling Sammons to claim Guggenheim was no longer an “affiliate or related party.” But the money, fees, loans, and a right to appoint representatives to the executive committee at Guggenheim remain. Only the affiliation vanished, just in time. Abracadabra!

The timing of the disappearing act looked like magic.

Then again, life insurers are supposed to be pretty good at predicting when someone’s time is up. And was it ever the right time for Sammons to downplay its ties to Guggenheim.

If Sammons was trying to pretend that the relationship with Guggenheim doesn’t exist, Guggenheim doesn’t seem to have gotten that memo.

Its investment manager’s July 30th filing still lists the Sammons insurers as related persons.

Which makes sense! Guggenheim still invests Sammons’ money, contributed by ordinary Americans to life insurance policies. And Sammons still owns a huge stake in Guggenheim.

That raises the question: Why, exactly, isn’t Guggenheim labeled as an affiliate in the Sammons filings? Especially because a Guggenheim filing from May 2026 still describes Sammons as holding “voting interests” in Guggenheim Capital and being its “largest individual stakeholder.”

The answer is unclear. Neither Sammons nor Guggenheim responded to repeated requests for comment.

But the Americans who have paid into the more than 1.7 million policies held by Sammons-owned insurers — and their beneficiaries — deserve to know the risks. Just how linked are their AM Best-rated, A+ insurers to the Guggenheim/Walter/TWG complex, parts of which are now under federal investigation?

HOW IT ALL FITS TOGETHER: SAMMONS, GUGGENHEIM, MARK WALTER’S TWG, AND TENS OF BILLIONS OF DOLLARS IN AMERICAN LIFE INSURANCE POLICIES

THE MISSING INSURERS

Sammons is a conglomerate whose insurers — Midland National Life and North American Company for Life and Health — hold roughly $130 billion in assets, rank among America’s largest sellers of annuities, and serve millions of people.

If you’ve never heard of Sammons, that’s unsurprising, despite its size. It’s a private company that hasn’t gotten much national coverage.

Charles Sammons took control of Reserve Life Insurance Company in Dallas in 1938 and spent the next four decades adding businesses in communications, industrial equipment, travel, and hospitality. The company became Sammons.

In 1978, Sammons launched an Employee Stock Ownership Plan (ESOP), making it one of the largest employee-owned companies in America. Which means the people with the most riding on what follows — other than perhaps the life insurance and annuity policyholders — are Sammons workers, whose retirement accounts hold the company’s stock.

The Sammons relationship with Guggenheim is older than Guggenheim itself.

Before Guggenheim Partners existed, Mark Walter co-founded Liberty Hampshire, an investment management firm in Chicago. Sammons bought into the firm. When Walter combined it with the newly created Guggenheim Partners (alongside partners including a descendant of the eponymous Guggenheim), Sammons came along.

That’s how a Dallas ESOP ended up as the largest shareholder of a firm named for a Gilded Age smelting, mining, and philanthropic dynasty — and how Walter’s firm ended up managing the Sammons insurance empire’s money. The concentration that followed wasn’t the result of a bake-off among asset managers; it was baked in from the start, a quarter century ago.

At the top of the Sammons org chart sits Sammons Enterprises, the Dallas holding company.

Below it are an industrial arm, a real estate arm, and the crown jewel: Sammons Financial Group (SFG), headquartered in West Des Moines, Iowa.

SFG owns various life and health insurers, including Midland National and North American.

As of 2023, Guggenheim ran 87% of SFG’s assets and collected roughly $75 million a year in disclosed fees. To put that in perspective: in the National Association of Insurance Commissioner’s data, handing a meaningful share of your portfolio to a single outside manager is overwhelmingly a small-company practice. 96% of insurers that do it have under $5 billion in assets, generally because they’re too small to run their own investment departments.

Among giants, the model exists in one well-known form: the private-equity-partnered insurers, like Apollo with Athene. The manager relationship is disclosed on page one of every filing, scrutinized by rating agencies, and debated by regulators precisely because of the conflicts it creates. Sammons runs the same concentrated model with the relationship labeled “unaffiliated.”

Strange as it was, the relationship between Sammons and Guggenheim had not been a secret.

Guggenheim Private Investments (GPI), a registered investment adviser within Guggenheim, dedicates an entire paragraph of its annual filing to the numerous conflicts created by Guggenheim’s multifaceted relationship with Sammons.

Among them: Sammons “holds an indirect, substantial economic interest in Guggenheim Capital;” “Sammons is a primary lender in a facility that provides leverage to a Private Fund;” and “Sammons is a significant individual source of annual advisory fees paid to one of GPI’s affiliates.”

But while Guggenheim continues to report the relationship across various filings, there is evidence that Sammons took steps to distance itself (at least on paper) from Guggenheim.

On page 140 of a January 2025 filing, the Sammons-owned insurer Midland National writes: “In the third quarter of 2024, Sammons Enterprises restructured its investment in Guggenheim Capital Partners which resulted in Guggenheim Capital and other related entities no longer being considered an affiliate or related party of the Company.”

To be clear: Sammons didn’t sell its Guggenheim shares, as far as the filings reveal. Instead, it converted a stake of approximately 30% economic share and 46% voting control into what Guggenheim’s most recent filing describes as an “indirect, substantial economic interest.”

What does this mean? It’s not exactly clear. Again, neither Sammons nor Guggenheim replied to repeated requests for comment. But it appears that Sammons disclosed that it has kept its economic stake while shedding its voting control.

By giving up those voting rights, Sammons allowed itself under Iowa regulations to reclassify certain assets from affiliated to unaffiliated thereby avoiding regulatory scrutiny.

What followed was an erasure across Sammons documents.

Roughly $2.1 billion of investments Midland National had carried as “affiliated” — which appear to be its Guggenheim-managed vehicles and Guggenheim bonds were — reclassified as unaffiliated.

The 2023 audited statements devoted a full paragraph to the relationship by naming GPIM (Guggenheim Partners Investment Management) as manager of 87% of the portfolio. It itemized $75 million in annual fees and $88 million of fixed maturity securities that “Guggenheim and its affiliates consolidate.” By 2025, Guggenheim is named zero times, and GPIM only once, in a footnote about securities the company values privately.

An investor deck in March 2025 called Guggenheim “our core manager with 88% of overall AUM,” whereas one in the fourth quarter of that same year made no mention of the firm.

This is an eerily familiar fact-pattern to anyone following the Delaware Life and Clear Spring investigations — in which the Department of Justice is probing whether Walter hid the related party ties between his insurers and his businesses.

Makes you wonder: What, exactly, distinguishes Sammons from Delaware Life and Clear Spring Life?

ON THE BOOKS

Hunterbrook reviewed the Sammons insurers’ investment filings line by line, from 2023 through the most recently reported quarter of 2026.

Beyond the roughly hundred billion dollars Guggenheim manages for Sammons, according to recent financial statements, we calculated that billions worth of Guggenheim-linked investments still sit in the insurers’ own portfolios.

Most of it is not labeled Guggenheim at all. Some sits in vehicles with names that give nothing away (except, perhaps, a taste for Herzog films): Fitzcarraldo Funding. Molly Aida. Campa. Orinoco. Teton. But Guggenheim’s own SEC filings reveal that these are its private funds and investment vehicles.

And at least one of those mystery vehicles can now be traced all the way to Mark Walter himself.

Take Teton Holdings I, a Guggenheim-managed investment owned almost entirely by Sammons insurers. The insurers carried the investment at roughly $197 million in 2022. By the end of 2025, it was worth only about $41 million on their books — a decline of more than $156 million.

An Iowa insurance filing identifies Teton Holdings I as the vehicle formerly known as G-Prairie LLC, managed by G-Prairie MM LLC, which the filing says is directly controlled by Guggenheim Partners Investment Management.

Then comes the missing link. Florida corporate records for Teton Ridge LLC list Teton Holdings I LLC as a member — and give its address as “c/o Guggenheim Partners Investment Mgmt.”

And Teton Ridge itself says the Western-sports and media company is owned by TWG Global, the investment conglomerate led by Walter and Thomas Tull. Walter is also Guggenheim Partners’ CEO.

The filings create a direct chain: Sammons insurers → Guggenheim-managed Teton Holdings I → Teton Ridge → TWG / Mark Walter → CEO of Guggenheim → part-owned by Sammons.

In practice, that means Sammons’ life-insurance and annuity money — from ordinary Americans — helped fund Teton Ridge, a company whose assets include The American Rodeo, a professional bull-riding team, The Cowboy Channel, a Western-lifestyle magazine, a Hollywood production studio and performance-horse operations — an unusually colorful destination for policyholder reserves.

We found no public document explaining why Sammons’ investment in Teton Holdings I lost more than two-thirds of its reported value, and the records do not establish that the decline has anything to do with the federal investigation into Walter’s other businesses. But they do show something that was previously hidden behind the name of an opaque private vehicle: Sammons insurance-company money was invested in a business inside Walter’s TWG empire, the same empire under DOJ investigation.

Sammons is directly exposed to the insurers under federal investigation, too, the ones that led to the private jet tarmac device seizure. Midland and North American hold $150 million of Delaware Life notes, purchased privately in 2016 — and swapped into a new instrument in January 2026, before the grand jury subpoenas arrived in February.

North American, meanwhile, has transferred about $367 million of liabilities to Clear Spring under a reinsurance deal. This lowers North American’s reserve requirements by ceding liabilities to Clear Spring, one of the Walter-controlled insurers that is under investigation. If Clear Spring can’t pay, North American has to rebuild the reserves, and the bill lands on Sammons’ policyholders.

This isn’t just leftover exposure from the old days, slowly running off. The relationship is still writing new checks — big ones. And shifting the capital multiplies the assets that generate fees for Guggenheim and the dividends for the owners of the insurers.

Last year, roughly a full year after the “de-affiliation,” Guggenheim’s lending arm launched a $400 million CLO, a bundle of loans that Guggenheim itself had originated, packaged, and managed. Sammons’ insurers took down $208 million of it — more than half the deal — according to their own investment schedules, apparently rolling their stake in the prior 2023 paper.

To be clear: no one has been charged with anything, and there is no indication Sammons is a subject, target, or witness in any investigation. Everything described here is, on the face of the filings, disclosed to and ostensibly permitted by regulators.

But consider the two stories side by side.

The government’s theory at Delaware Life is that related-party exposure was made to look unrelated by concealment. At Sammons, the same reporting outcome was achieved through corporate engineering.

Ratings agencies cut status after the corrected disclosures. After Delaware Life restated its disclosures — increasing its reported related-party investments from $1.4 billion, about 3% of its portfolio, to more than $17 billion, as much as 42% — S&P Global and AM Best each cut their outlooks to negative. Fitch put the company on Rating Watch Negative.

So far, Sammons has stayed out of this spotlight. That may not last.

Over the weekend, the Sammons insurers released their latest quarterly statements — the first since the firm’s CEO announced his retirement at the beginning of the month, after 16 years. (The CEO of Sammons Financial’s parent conglomerate Sammons Enterprises is unchanged).

Once again, Guggenheim was absent from the related-party note. But it was not absent from the filings.

Both insurers listed GPIM among the firms authorized to make investment decisions on their behalf. Both placed a “U” next to its name: unaffiliated. In one place, Sammons discloses that the insurers were actively buying, redeeming, and holding Guggenheim securities in this past quarter.

Whether recent scrutiny will change the disclosures in the next quarter remains to be seen.

Either way, Sammons and Guggenheim made for a helluva team for a long time, as they grew, together, into global giants.

But all great dynasties eventually end. Kobe and Shaq. Magic and Kareem.

AUTHORS

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life. Sam is based in New York City.

Matthew Termine is a former corporate lawyer with significant experience advising companies operating within regulated industries. Matt led Hunterbrook’s investigation and reporting on United Wholesale Mortgage. In 2017, Matt was credited by the Wall Street Journal, among others, for identifying suspicious mortgage loan transactions that led to several successful criminal prosecutions, including that of a prominent political operative and the chief executive officer of a federally chartered bank. He is a graduate of Trinity College and Fordham University School of Law.

JD Jean-Jacques joined Hunterbrook from Goldman Sachs, where he worked as an investment banker. He was editor-in-chief of Howard University’s newspaper, The Hilltop, and wrote for The Exonian at Phillips Exeter Academy. Among other recognitions, JD was a White House Correspondents’ Association Scholar and was named Student Journalist of the Year by The National Association of Black Journalists. He graduated from Howard with a B.A. in history.

EDITOR

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor’s from Emory University. Vikas is based in Maryland.

DISCLOSURES

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BY: Till Daldrup

EDITOR: Vikas Kumar

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, does not have any positions related to this article at the time of publication. Positions may change at any time. Full disclosures on our website.

Solar is coming home.

That, at least, was the impression given in May by press coverage of JinkoSolar’s sale of its Florida manufacturing plant. “US private equity firm acquires controlling stake in JinkoSolar’s American operations,” a Solar Power World headline read. “Major Chinese solar panel manufacturer JinkoSolar Holding has agreed to sell a 75.1% stake in subsidiary Jinko Solar (U.S.) Industries to American private equity firm FH Capital under plans announced Friday,” Nikkei wrote.

Jinko’s divestiture could allow its solar panel operation in Jacksonville, Florida, to remain eligible for Biden-era federal tax credits that pay module assemblers 7 cents per watt produced. For Jinko’s U.S. subsidiary, they are crucial. The 45X credit subsidizes the production of solar energy components and other goods in the U.S. In 2025, JinkoSolar’s U.S. operations received $146 million from the credit, according to the company’s annual report. This was more than three-quarters of the net profit its Florida plant reported that year in Jinko’s Shanghai Stock Exchange disclosure.

New Trump administration rules stipulate that a U.S. solar operation becomes a “foreign-influenced entity” and therefore loses its tax credit eligibility, if a single Chinese company or other specified foreign entity owns at least 25% of it (among other rules designed to limit foreign influence). “Specified foreign entities” are the governments, citizens, and companies of China, Russia, Iran, and North Korea, anything they control, and entities on certain U.S. government blacklists.

These foreign-entity rules are one arm of a broader U.S. crackdown on Chinese solar that also includes anti-dumping duties on solar cells from Chinese manufacturers’ Southeast Asian plants, a forced-labor import ban, and a 15% tariff and minimum import prices on polysilicon, wafers, cells, and modules that was announced last week.

Jinko sold 75.1% of its U.S. business to what press coverage called an “American” firm and kept a stake just below the ownership threshold, which means the Florida plant could remain eligible for tax credits.

But a Hunterbrook analysis of corporate filings in the U.S., the British Virgin Islands, and Hong Kong suggests that FH Capital, the private equity firm that announced it is acquiring the majority stake in Jinko’s U.S. operations through a designated affiliate, is not American at all but is actually based in Hong Kong. It is controlled by the family of Zhengrong Shi, known as the “Sun King,” the founder and owner of several major Chinese solar companies.

FH Capital confirmed to Hunterbrook in a written statement that Shi himself was involved in the deal. “Dr. Shi is an internationally recognized solar scientist and entrepreneur who brings decades of technical and industry experience to his work,” the statement reads. “In that capacity, he lent his technical and industry expertise during the Jinko transaction.”

Dennis Shi, his son, is now the board director of Jinko’s former U.S. business, which was renamed Jax Power Industries Inc. in July, according to Florida corporate filings. Dennis is also president at Sunman Energy, his father’s Shanghai-headquartered solar module company, according to an Australian news report from March. Sunman manufactures its panels in mainland China, according to pv magazine. Its new manufacturing facility in the U.S. was still under construction and a plant in Australia in planning stages as of December 2025, the magazine reported.

Several tax law experts, however, told Hunterbrook that despite the Shis’ ties to China, the arrangement would possibly not trigger the new foreign influence restrictions as written. That’s because Shi and his family are Australian citizens. The Treasury Department also hasn’t released guidance on whether Hong Kong is going to be considered China under the foreign entity of concern (FEOC) rules, according to the tax experts. FH Capital’s Hong Kong ties were first reported by Bloomberg.

FH Capital told Hunterbrook that it is “an investment advisory firm that operates internationally,” and that the acquisition was completed through a Delaware entity called FH JKV Holdings Limited.

“FH Capital is not a shareholder or investor in the restructured Jinko Solar U.S. manufacturing entity,” the company said. “It acted as an investment adviser in connection with the transaction, including supporting its structuring, negotiation and execution. FH Capital’s advisory role should not be conflated with ownership.”

Therefore, according to the apparent logic behind the deal, its Hong Kong ties would not matter under FEOC rules.

Hong Kong’s status isn’t the only open question. While Congress’s restrictions are in force, the Treasury Department has yet to issue the regulations that spell out how exactly key tests will be applied under the law. Congress set a deadline for the end of the year.

Two other features of the deal could become problematic depending on how Treasury addresses these questions. Both concern Jinko’s continued influence over the Florida plant.

First, there could be a trademark problem: In its Shanghai Stock Exchange filing, Jinko said that it would allow the Florida plant’s modules to continue “to be sold to third parties under the Company’s brand in accordance with agreed terms,” based on a translation from the Chinese. Jinko’s U.S. trademarks are owned by its Chinese parent company, which means its former Florida business could become ineligible for tax credits: The paid use of a specified foreign entity’s intellectual property by a domestic solar operation means that this U.S. producer is under the “effective control” of that foreign entity, according to the Trump administration’s new rules. But the Treasury Department has not said whether the rules cover trademarks and logos or only production technology like patents and manufacturing know-how — leaving open whether a brand license alone is enough to trip the wire.

Second, there could be a debt issue: Only 51% of the $191.5 million purchase price was paid when the deal closed. The remaining $94 million was deferred into two tranches that come due only after “certain conditions” are met, according to Jinko’s Shanghai Stock Exchange disclosure, but the document does not specify what those conditions are, and it is unclear whether the payments have since been made. That money is owed by FH Capital’s designated affiliate, which owns 75.1% of the plant, making Jinko a major creditor of the plant’s owner. Under the FEOC rules, an entity becomes “foreign-influenced” if specified foreign entities hold 15% or more of its debt. Whether the $94 million exceeds 15% of the acquisition vehicle’s total debt can’t be determined from public filings.

As with the trademark question, the Treasury Department has not given specific guidance on this point, according to experts: Whether a deferred purchase price counts as “debt” under that test and whether a parent company’s foreign-influenced status would taint the plant that actually claims the credits are questions the Treasury Department’s interim guidance explicitly left for future rulemaking.

Until the Treasury Department answers, Jinko’s deal sits in a gray zone: It’s structured to clear the rules as written, but the Florida plant potentially faces exposure on the points the rules haven’t yet settled.

“The Trump administration and the Treasury Department are very clear-eyed about how Chinese companies will restructure and try to get creative to avoid U.S. policies designed to target them specifically,” Nick Iacovella, the executive vice president and head of public affairs and communications at the Coalition for a Prosperous America, told Hunterbrook. The lobbying organization for domestic manufacturers had celebrated Jinko’s divestiture as part of a broader retreat of Chinese solar companies in the U.S. in a blog post.

“I don’t think what Jinko has done will pass the smell test for the administration,” Iacovella said.

“We do not speculate about potential future changes in U.S. policy,” FH Capital told Hunterbrook.

Jinko Solar and an executive of Jax Industries did not respond to a request for comment.

FH CAPITAL’S TIES TO HONG KONG

The likely reason other media outlets that covered the Jinko deal thought FH Capital is an American company: It has an office in New York, according to its website. And the acquisition vehicle it used in the Jinko deal is a Delaware-registered corporation, according to Jinko’s Shanghai Stock Exchange filing.

But the office the private equity firm claims at 1325 Avenue of the Americas in Manhattan is actually an office rental space owned by Regus.

“FH Capital has never described itself as an American or U.S.-based private equity firm,” FH Capital told Hunterbrook, saying that it maintains “a presence in Sydney, Hong Kong and New York.”
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Its ties to Hong Kong appear to be especially deep, according to a Hunterbrook analysis of corporate filings.

FH’s privacy policy and terms of service on its site revealed its full name (the firm appears to have deleted them within the past two weeks): “Fortune Harmony Investments Limited,” a company that’s registered in Hong Kong, corporate records show. It also lists a Hong Kong office tower as its official postal address (though it’s also just a rental space, same as its New York address).

According to FH Capital’s announcement about its deal with Jinko, the private equity firm is “led by” Sanjeev Chaurasia, its managing partner and chief investment officer, who is currently listed as the only team member on FH’s website. Chaurasia previously was a managing director at Credit Suisse and “led JinkoSolar’s IPO on the NYSE in 2010,” FH’s press release said. Chaurasia is based in Hong Kong, according to his LinkedIn account.

“Mr. Chaurasia is an Indian citizen who divides his time among New Delhi, Hong Kong and New York. He was previously based in New York before Credit Suisse transferred him to Hong Kong, where amongst his responsibilities he led investment banking for the sector across the Asia-Pacific region,” FH Capital told Hunterbrook.

ES Foundry, a solar cell manufacturer with a plant in Greenwood, South Carolina, that FH Capital presented as part of its “portfolio” on its website, lists Chaurasia and Dennis Shi as its directors in an SEC filing. It also lists a Hong Kong phone number.

And solar project developer hep global GmbH, a company that announced it has gained FH Capital as a “financial investor,” seemingly confirmed the location of the firm’s headquarters in a May ad hoc disclosure: “FH Capital is headquartered in Hong Kong and has a diversified position in the United States through investments in module manufacturers and project developers, among other things.”

“FH Capital is not an investor or shareholder in either hep global GmbH or ES Foundry,” FH Capital told Hunterbrook. “Its role has been strictly advisory: it advised the parties that invested in hep global GmbH and has advised shareholders of ES Foundry.”

FH Capital listed ES Foundry as part of its portfolio on its website as recently as August 4, according to a screenshot saved by Hunterbrook, but that mention has since been deleted from the page.

Jinko’s disclosures with the Shanghai Stock Exchange about its divestiture state that FH Capital is an investor in ES Foundry: “Its portfolio includes investments in ES Foundry — a company focused on the manufacturing and sales of photovoltaic cells in the U.S.”

Jinko also named the specific entity that bought the majority stake in its Florida plant: FH JKV Holdings Limited, a company registered in Delaware. Jinko also disclosed that this entity is actually controlled by a British Virgin Islands entity called Prosper Bright Ventures Limited.

And the company named the person who ultimately controls FH JKV Holdings: Zhang Wei.

THE FAMILY TIES BEHIND THE DEAL

It didn’t take Chinese business media long to figure out who Zhang Wei is. Reporters matched a partially masked passport number (a standard disclosure in Chinese deal announcements) to an IPO prospectus of Zhengrong Shi’s polysilicon company Asia Silicon, which identified Zhang Wei as his wife.

According to Hong Kong corporate filings, Zhengrong Shi and Zhang Wei founded FH Capital, or Fortune Harmony Investments, together in 2023, holding one share each. Shi exited the company in 2024, and both his and his wife’s shares were transferred to Ascend Pioneer Group Limited, a British Virgin Islands entity. Zhang Wei is the sole board director of that entity, according to British Virgin Islands filings obtained by Hunterbrook.

While Zhengrong Shi was reportedly born in China, he is an Australian citizen, and so is his wife. But both are also Hong Kong residents, according to the Hong Kong corporate registry.

Their sons, Dennis Shi and Mitchell Shi, are also both Australian citizens. Both are deeply involved with the family business.

Dennis is president of Sunman Energy. Mitchell served as an assistant to the CEO of Siltrax – his father, who also co-founded the Sydney-based hydrogen venture.

Dennis and Mitchell Shi are also both directors of the British Virgin Islands entity that controls the Delaware-registered acquisition vehicle in the Jinko deal.

A team page on FH Capital’s website listed them both as executive directors of the firm. The Shis were removed from this page between April 11 and the deal announcement on May 8. Only Chaurasia’s bio remained on the website.

Dennis Shi appears to play a special role after the deal with Jinko: He’s now the only board director listed for the renamed Florida entity Jax Power. Michael S. Favo, the Jacksonville plant’s longtime general manager under Jinko’s ownership, is now Jax Power’s president.

In short: Zhengrong Shi’s family appears to have taken control of a 2 GW solar module plant in the U.S. It’s a comeback of sorts for the businessman nicknamed the “Sun King.”

Shi, who was born in Yangzhong, China, earned his Ph.D. at the University of New South Wales under solar pioneer Martin Green, took Australian citizenship, then returned to China in the early 2000s to found Suntech. He built the company into one of the world’s largest solar module makers. Suntech went public on the New York Stock Exchange in December 2005. In 2006 Shi was the richest man in China and his stake in Suntech was worth $1.7 billion.

Time Magazine in 2007 named him one of its “Heroes of the Environment” (alongside Al Gore, Mikhail Gorbachev, David Attenborough and then-Prince Charles) and media coverage identified him as the world’s first “green billionaire.”

But the empire collapsed: Suntech fell apart after it was discovered that bonds pledged to it as loan collateral by an affiliated fund, which Shi part-owned, apparently never existed. Shi stepped down as CEO and was a defendant in a U.S. investor lawsuit that settled for $5 million. Suntech eventually went bankrupt and was delisted from the NYSE.

After losing Suntech, Shi spent the next decade rebuilding quietly through ventures he founded and his family runs: He founded Sunman, a Shanghai maker of lightweight solar modules. He remained the force behind Asia Silicon, the family’s Qinghai polysilicon producer, which abandoned its 2020 Shanghai IPO. And he co-founded Siltrax, the Sydney hydrogen startup.

Chinese media is framing the Jinko acquisition as a major step in Shi’s redemption arc: “Zhengrong Shi, the godfather of photovoltaics, returns,” a TMTPost headline read.

“Zhengrong Shi, the ‘godfather of photovoltaics’ who had been silent for a long time, has once again stirred up the market,” China Business Daily reported. “From founding Wuxi Suntech in 2001, to his low-key retreat, and now to taking over overseas assets, Zhengrong Shi has faded from public view over the past two decades, but he has never truly left the photovoltaic industry.”

The Jacksonville solar module plant is now in the hands of the family of one of the most influential men in the Chinese solar industry. Is Jinko’s U.S. business truly free of foreign influence under its new majority owner? And is this the type of deal that the Trump administration’s rules were designed to allow?

UNDER THE INFLUENCE

Several tax law experts told Hunterbrook that the Jinko deal appears to be sound on paper under the new FEOC rules: The main corporate officers involved, the Shi family and Sanjeev Chaurasia, who is an Indian citizen according to the Hong Kong corporate registry, are apparently not Chinese citizens or nationals. And that’s what’s relevant. An individual’s ties to or positions at Chinese companies are inconsequential under the tax credit rules, the experts said.
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“Shi Zhengrong and Zhang Wei became Australian citizens in the mid-90s. Neither holds dual citizenship,” FH Capital told Hunterbrook.

FH Capital may be based in Hong Kong, but the Treasury Department hasn’t released specific guidance on whether the special administrative region will be considered part of China under the FEOC rules, two tax experts said. One tax lawyer told Hunterbrook he’s working under the assumption it will be considered China “until told otherwise by Treasury.”

But even if it were considered PRC territory: While FH Capital announced the Jinko deal under its own name, the actual acquisition was carried out via Delaware- and British Virgin Islands-registered vehicles that are themselves controlled by Shi’s family members and Chaurasia, according to corporate filings obtained by Hunterbrook.

“The acquisition was executed through FH JKV Holdings Limited, a Delaware entity controlled by Prosper Bright Ventures Limited, a BVI entity whose directors are Dennis Shi, Mitchell Shi and Mr. Chaurasia,” FH Capital told Hunterbrook. “According to Jinko Solar’s Shanghai Stock Exchange disclosures, Zhang Wei is the ultimate controller of the ownership structure.”

That would mean there is no direct connection to China or Hong Kong.

What could potentially become an issue: Jinko was only paid about half of the purchase price for its Florida operation at the closing of its deal with FH Capital. The rest of the payment, about $94 million, was deferred and is supposed to be transferred in two additional tranches, according to Jinko’s corporate filing: a first one of about $30 million, and a second of about $64 million. It’s unclear when and under which conditions those transactions are supposed to be made or whether one or both of them have already been completed.

That means Jinko may still be a major creditor of FH Capital’s designated affiliate FH JKV Holdings, which is the entity that controls the Florida plant, and that debt could make that affiliate “foreign-influenced” under the Trump administration’s FEOC rules. An entity is considered foreign-influenced if 15% or more of its debt is held by one or more specified foreign entities.

But the Treasury guidance leaves two things unclear: whether money owed as a deferred purchase price counts as “debt” under that test, and whether a parent company that fails it drags down the plant that actually claims the credits. The Treasury Department has said it will address such questions in future rulemaking.

Another possible red flag: Jinko said in a corporate disclosure that it would allow Jax Power to continue to sell solar modules “under the Company’s brand.” But Jinko’s U.S. trademarks, including its logos, are owned by its Chinese parent company, according to U.S. Patent and Trademark Office records.

Under the new FEOC rules, paying to license intellectual property from a specified foreign entity after July 4, 2025, puts the licensee under that entity’s “effective control,” which could cost the plant its tax credit eligibility. But the Treasury Department did not specify whether the rule covers soft intellectual property like trademarks and logos, or only patented hardware and production technology. It’s unclear whether using Jinko’s brand would mean that Jax Power would have to forgo the tax credits, tax experts told Hunterbrook.

Nick Iacovella from the Coalition for a Prosperous America expects the Treasury to address any open questions in reaction to divestiture deals like Jinko’s. “The longer that the Treasury waits to put the guidance out the more time that they’ll have to see how Chinese companies are restructuring to make sure that there aren’t any loopholes in the guidance,” he said.

“Multiple reputable law firms advised the buyer and seller on the Jinko Solar transaction, including on the post-closing structure and its alignment with applicable OBBBA requirements,” FH Capital told Hunterbrook, referring to the One Big Beautiful Bill Act, which includes the FEOC rules.

The tax credits are the Florida plant’s economic engine. Under Section 45X, module makers earn 7 cents for every watt produced and sold. For JinkoSolar’s U.S. operations, that was worth $146 million in 2025, more than three-quarters of the Jacksonville plant’s net profit that year.

And Jinko is not alone: Several other Chinese companies divested from their U.S. businesses over the past few months after the Trump administration introduced the new rules. LONGi reportedly cut its stake in the 5 GW plant in Pataksala, Ohio, that it runs with U.S.-based Invenergy, to “stay below” the FEOC ownership threshold. Canadian Solar moved its U.S. solar manufacturing unit from its Shanghai-listed subsidiary CSI Solar to sit under its Nasdaq-listed parent company. And JA Solar had already sold its entire Phoenix facility to American tech manufacturing company Corning before the new rules took effect.
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Jinko itself spelled out the stakes in its latest annual report, warning that under the new law “the applicability of advanced manufacturing tax credits to our U.S. subsidiary in 2026 and future years is uncertain, which could have a material adverse impact” on its business. Across the industry these credits are routinely sold to corporate buyers. First Solar alone has transferred more than $2 billion of them. Jinko has disclosed that in 2025 it sold $128 million of accumulated credits for $120 million in cash, without naming the buyers.

Whether the Jacksonville plant has potentially forfeited its tax credit eligibility is unclear. Tax credits are self-assessed: Jax Power will decide what to claim on tax returns the public likely never sees, and any IRS challenge would possibly unfold in secret, surfacing only if a dispute lands in court. Quicker verdicts will likely come from the market, where credit buyers’ lawyers and insurers now demand assurances that no “prohibited foreign entity” lurks in the chain.

Until then, a U.S. business that collected $146 million in federal subsidies last year belongs to the family of the returning Sun King.

AUTHOR

Till Daldrup is an investigative journalist who joined Hunterbrook from The Wall Street Journal, where he focused on open-source investigations and content verification. In 2023, he was part of a team of reporters who won a Gerald Loeb Award for an investigation that revealed how Russia is stealing grain from occupied parts of Ukraine. He has an M.A. in Journalism from New York University and a B.S. in Social Sciences from University of Cologne. He’s also an alum of the Cologne School of Journalism (Kölner Journalistenschule).

EDITOR

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor’s from Emory University. Vikas is based in Maryland.

Jean Wang and Blake Spendley contributed reporting.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please contact ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work opportunities, and press@hntrbrk.com for media inquiries.

DISCLOSURES

© 2026 Hunterbrook Media LLC. All rights reserved. Use of this website is strictly governed by our Terms of Use. The content herein is furnished on an “AS IS” basis without any form of express or implied warranty. For information regarding our privacy practices, please refer to our Privacy Policy.

Hunterbrook Media LLC (”Hunterbrook Media”) is an investigative news organization. Hunterbrook Media is affiliated with Hunterbrook Capital LP (”Hunterbrook Capital”), an exempt reporting adviser with the U.S. Securities and Exchange Commission that serves as investment adviser to one or more investment funds. Hunterbrook Media and Hunterbrook Capital are legally separate entities under common control. Hunterbrook Capital’s investment activities are one source of funding for Hunterbrook Media’s journalistic operations. Hunterbrook Capital may hold long positions, short positions, positions through derivative instruments including options and swaps, or no position in any security covered or mentioned on this website. Consistent with applicable policies and procedures, Hunterbrook Capital may establish, modify, or close positions in covered securities before or after the publication of any Hunterbrook Media article. Following publication of any article, Hunterbrook Capital will continue transacting in covered securities for an indefinite period and may be long, short, or flat at any time thereafter, regardless of any position described at publication. Hunterbrook Media has no obligation to update any article or disclosure to reflect subsequent changes in Hunterbrook Capital’s positions.

Nothing on this website constitutes investment advice, a recommendation to buy, hold, or sell any security, or a solicitation to purchase or sell any securities. No securities shall be offered or sold in any jurisdiction where such activities would be contrary to applicable securities laws. Hunterbrook Media is not a registered investment adviser in the United States or any other jurisdiction. Nothing herein should be construed as investment advice or a recommendation of any kind. This information should not be relied upon as a substitute for independent research or professional financial, legal, or tax advice.

This website may feature forward-looking statements reflecting Hunterbrook Media’s current views. Such statements, identifiable by terms including but not limited to “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “should,” and “will,” are inherently speculative and subject to risks and uncertainties. Actual results or outcomes may substantially deviate from those projected. Hunterbrook Media expressly disclaims any obligation to update or revise any forward-looking statements, regardless of subsequent developments or new information.

The information presented is current as of the date indicated. No representation regarding the completeness or timeliness of this information is made. Some information is sourced from third parties and, while believed to be reliable, has not been independently verified, and its accuracy or completeness is not guaranteed. Hunterbrook Media is not affiliated with any sites linked to this website. Investment in securities and other financial instruments involves significant risk, including the potential loss of principal. Users are advised to conduct their own due diligence and consult professional advisors before engaging in any investment activity. Use of Hunterbrook Media’s content is entirely at the user’s risk. Users shall not use this site for any illegal or prohibited purposes and shall comply with all applicable local, state, national, and international laws and regulations.

Should any provision of these Terms of Use be adjudged invalid or unenforceable, the remaining provisions shall remain in full force and effect. Trademarks contained in links to third-party websites belong to their respective owners. Hunterbrook Media retains copyright on all text, content, graphics, and trademarks displayed on this site.

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, does not have any positions related to this article at the time of publication. Positions may change at any time. Full disclosures below.

By: Matthew Termine, Sam Koppelman

Editor: Vikas Kumar

United Wholesale Mortgage had been the largest home lender in America. Its CEO, erstwhile decabillionaire Mat Ishbia, bought the Phoenix Suns basketball team. Then Hunterbrook Media exposed UWM for misleading homebuyers. By 2026, the company’s balance sheet had already weakened from Ishbia stripping $3 billion of cash via dividends and distributions from the company. Then Ishbia made a large directional bet on interest rates. It was a bad bet. So last week, UWM suspended its dividend and signed an emergency rescue deal with the distressed situations desk at Oaktree.

Ishbia claims the bet was to hedge the potential acquisition of Two Harbors. SEC documents point to a different, more plausible explanation: a massive wager — by a CEO who had insisted he didn’t trade on rates — that helped break the company’s balance sheet. In response to a request for comment, UWM said: “UWM has been transparent in its public filings and communications, and we do not view Hunterbrook as a credible or objective source for determining the facts”.

It started with a pugnacious voicemail about a competitor.

“We fucking took those cocksuckers down,” Ishbia told an ally in a voicemail obtained by Hunterbrook. “And we’re gonna keep fucking sticking it to them forever.”

In April 2024, Hunterbrook published our debut investigation, including that message.

The months-long, data-driven deep dive revealed that many mortgage brokers that UWM and Ishbia marketed to homebuyers as “independent” were actually sending essentially all their business to UWM. The company said the article was full of “numerous lies.”

The Ohio attorney general later sued UWM over similar conduct; that lawsuit is ongoing. Homebuyers brought a federal class action against UWM; a judge dismissed several of the claims, the others survived a motion to dismiss. UWM called the lawsuit a “sham.”

Hunterbrook’s investigation also spotlit that UWM management was draining cash from the company via an unsustainable annual dividend of more than $600 million. Most of that money went to Ishbia and his family, which owned the vast majority of the company’s shares. Ishbia has also sold UWM stock aggressively over the past several years, selling more than $600 million worth of $UWMC.

Ishbia, who walked onto the basketball team at Michigan State, used the gains from the $UWMC’s SPAC-backed public listing to purchase the Phoenix Suns. He even took out a massive margin loan with J.P. Morgan against his $UWMC shares to fund the transaction.

How did the largest mortgage lender in the country run out of money?

Beyond the dividend, UWM now says that its latest loss — $600 million — was a one-time mistake related to a failed proposed acquisition of Two Harbors Investment Corp. But UWM’s own SEC filings undercut that claim. And the facts appear to indicate something very different: a naked wager intended to prop up the company and avoid the very rescue UWM ended up needing.

THE STORY ISHBIA TELLS

Since UWM disclosed the loss on August 5, Ishbia’s explanation — across an earnings call, investor deck, and company statements to the press — is that the big surprise loss was a hedge: a prudent, deal-related, one-time protection gone wrong.

The idea: UWM had planned to buy Two Harbors, an entity that owned a significant book of mortgage servicing rights (MSRs). MSRs gain value when rates rise and lose value when rates fall. So Ishbia made a bet on rate cuts, ostensibly to protect against Two Harbors’ assets becoming less valuable between when UWM offered to buy the company and when the deal was set to close.

At least that’s the story.

“We were over-hedged, if you think of it that way, protecting against the Two Harbors transaction,” Ishbia said on the August 6 call. “The market moved against us, and it’s a one-time event that won’t happen again.”

“When you’re going through and acquiring a company like Two Harbors and a massive MSR book, then our MSR book becomes double the size of what we’ve always managed,” he explained.

The narrative has stayed consistent.

The company’s investor deck stated that UWM “recognized a $603M Q2 ‘26 derivative loss tied to exposure it expected to assume in connection with the TWO transaction.”

A spokesperson told HousingWire the net loss was “primarily driven by a unique hedge-related event tied to the anticipated Two Harbors MSR transaction,” calling it “a quarter-specific mark-to-market impact” that “does not reflect the underlying strength of UWM’s core business.”

Press outlets have taken the explanation at face value, too. “UWM’s situation became acute in the latest quarter after the company took a $603 million loss related to interest-rate hedges—essentially bets that pay off if rates fall,” wrote The Wall Street Journal.

KBW analysts described the quarter’s GAAP miss as “driven by a $603 million loss on interest rate derivatives, which hedged the Two Harbors MSR portfolio,” HousingWire reported. UWM “suffered losses on a hedge position against Two Harbors’ MSR book,” the HousingWire article read, explaining that the deal “would have doubled the size of its MSR book, significantly increasing risk.”

It’s a clean explanation. But the filings suggest a different reason behind the loss: a $27.5 billion bet on interest rates that, at least at moments, may not have been hedging anything at all.

‘WE DO NOT HEDGE OUR MSRS’

A month before announcing the Two Harbors deal, Ishbia told analysts on UWM’s third-quarter 2025 earnings call: “We do not hedge our MSRs, as you are hopefully aware.”

The posture made sense. UWM’s strength is originating mortgages, a business that wins when rates fall because mortgages become more affordable for borrowers. MSRs, by contrast, move in the opposite direction.

This dynamic led Ishbia to call UWM’s strength in origination a “natural hedge” on the most recent earnings call because, again, MSRs gain value with higher interest rates (because people are less likely to refi), while mortgages are more expensive (and thus harder to originate). UWM’s most recent annual filing reflected that strategy: The derivatives disclosures showed the routine pipeline instruments originators usually carry — rate locks and forward loan sale commitments — and no other standing interest rate position.

Then, in the first quarter of 2026, a new line appeared.

UWM’s first-quarter 10-Q, filed in May, disclosed a position that had not existed at year-end: “other interest rate derivatives.” The listed notional value: $27.5 billion, about an order of magnitude larger than the company’s market cap.

By March 31, the position was already a $288 million liability, with a $138.2 million loss running through the first-quarter income statement. Counterparties were holding $670 million of UWM’s cash as margin: more than 40% of the company’s total equity, posted as collateral to keep UWM’s derivatives positions open, the largest of which was the $27.5 billion notional position.

The position stood to lose roughly $360 million from a 25-basis-point rise in rates, based on the sensitivity disclosed by UWM. It was positioned to profit if rates fell: the same direction UWM’s entire origination franchise already leans. A hedge should offset risk. This position appeared to multiply it.

In the second quarter, the 10-year Treasury yield climbed from roughly 4.3% toward what would eventually become an 18-month high. UWM’s position lost another $603 million — $741 million in total across six months — before UWM drastically reduced the position. Book equity fell 38% in a single quarter, from $1.6 billion to $985 million.

Three weeks after the quarter ended, UWM signed the Oaktree term sheet.

TWO HARBORS DEAL DIED IN Q1

So was this ever really a hedge?

Two critical facts suggest that it was not: first, that the Two Harbors deal was already dead prior to the second quarter; second, that the Two Harbors MSR portfolio was already hedged … by Two Harbors itself.

Two Harbors terminated its merger agreement with UWM — signed December 17, 2025 — on March 27, when Two Harbors announced it had agreed to an all-cash offer from CrossCountry Mortgage. UWM’s own 10-Q confirms it received the termination fee “in the first quarter of 2026.”

The writing was on the wall even earlier: On March 16, Two Harbors adjourned its special meeting because the votes to approve the UWM deal weren’t there.

UWM maintained hope. Ishbia continually raised his bid for the asset. But for someone claiming to be interested in hedging, he did not appear to reduce the size of his bet on rate cuts as the TWO deal grew less likely to close.

UWM carried the full $27.5 billion notional position at the beginning of the second quarter — a time at which it had no contract to acquire Two Harbors and only a long-shot proxy campaign urging Two Harbors shareholders to vote down the competing deal. UWM’s stated reason for the loss was a hedge against “exposure it expected to assume in connection with the TWO transaction.” But from March 27 onward, there was no transaction. There was only the trade.

THE TWO HARBORS PORTFOLIO WAS INDEPENDENTLY HEDGED

There is another reason Ishbia’s explanation doesn’t fully make sense: The Two Harbor assets were already hedged by their owner, Two Harbors. So if Ishbia ended up buying the asset, he wouldn’t just be buying the assets, including interest-rate sensitive MSRs; he’d be buying the hedges, too.

Two Harbors, after all, is a mortgage REIT that is in the business of managing mortgage assets with inherent interest rate risk. Two Harbors’ Q1 2026 Investor Presentation shows that its portfolio was subject to only a 1.3% decrease in common book value on a 25 bps decrease in interest rates, amounting to roughly $15 million. Compare this to UWM, whose MSR hedge cost the company almost half its book value.

UWM’S LAWSUIT AGAINST TWO HARBORS DOESN’T MENTION THE LOSS

UWM is now suing Two Harbors, alleging breach of contract and fraud, claiming damages including “lost profits, lost synergies, lost opportunities for capital efficiencies it would have realized in the UWM Merger.”

If the $603 million loss were caused by the collapse of the Two Harbors transaction, it might have been the largest single line item in the complaint. But it’s nowhere to be found.

‍WHAT THE TRADE ACTUALLY LOOKS LIKE

By early 2026, UWM’s balance sheet was strained by years of dividends. The company had distributed roughly $3 billion since 2021. Over 80% went to the Ishbia family. Increasingly, the dividend relied on borrowed money. UWM’s secured credit lines went from zero in September 2025 to nearly $3 billion by June.

A sharp drop in interest rates would have potentially turned things around — leading not just to a refinancing boom for the company’s origination business but also, because of Ishbia’s bet, to a massive trading profit. Instead, rates rose.

The rescue that followed cost the common shareholders their dividend, their place in the capital stack and by the terms of the deal, potentially, one day, the company itself.

UWM, which had previously been governed — without much oversight — by the Ishbia family, now has slots for two Oaktree representatives on the board. If UWM fails to meet certain obligations, Oaktree can take over the entire company. And in the meantime, Oaktree isn’t taking any chances.

Its Investor Rights Agreement contains a clause requiring Oaktree executives to approve UWM’s “capitalization and hedging policy.”

In other words: The days of Mat Ishbia seemingly YOLO trading interest rates may be over.

Hunterbrook reached out to UWM, Two Harbors, and Oaktree with specific questions. Only UWM responded, noting that Hunterbrook provided a tight deadline to respond and offered the following statement:

“Hunterbrook is a hedge fund, not an independent news organization. Considering Hunterbrook’s history of publishing inaccurate allegations that have spawned multiple litigation matters, many of the claims have been resolved in UWM’s favor, it is difficult to view this inquiry as a legitimate journalistic exercise. UWM has been transparent in its public filings and communications, and we do not view Hunterbrook as a credible or objective source for determining the facts.”

AUTHORS

Matthew Termine is a former corporate lawyer with significant experience advising companies operating within regulated industries. Matt led Hunterbrook’s investigation and reporting on United Wholesale Mortgage. In 2017, Matt was credited by the Wall Street Journal, among others, for identifying suspicious mortgage loan transactions that led to several successful criminal prosecutions, including that of a prominent political operative and the chief executive officer of a federally chartered bank. He is a graduate of Trinity College and Fordham University School of Law.

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. He helped build Fenway Strategies into one of the preeminent strategic communications firms in the country—with side quests speechwriting for Michael Bloomberg, running the surrogate remarks operation on the Biden-Harris campaign, and co-founding Mayday, which is now one of the leading information providers on how to access reproductive health care in states with bans. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

EDITOR

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor’s from Emory University. Vikas is based in Maryland.

DISCLOSURES

© 2026 Hunterbrook Media LLC. All rights reserved. Use of this website is strictly governed by our Terms of Use. The content herein is furnished on an “AS IS” basis without any form of express or implied warranty. For information regarding our privacy practices, please refer to our Privacy Policy.

Hunterbrook Media LLC (”Hunterbrook Media”) is an investigative news organization. Hunterbrook Media is affiliated with Hunterbrook Capital LP (”Hunterbrook Capital”), an exempt reporting adviser with the U.S. Securities and Exchange Commission that serves as investment adviser to one or more investment funds. Hunterbrook Media and Hunterbrook Capital are legally separate entities under common control. Hunterbrook Capital’s investment activities are one source of funding for Hunterbrook Media’s journalistic operations. Hunterbrook Capital may hold long positions, short positions, positions through derivative instruments including options and swaps, or no position in any security covered or mentioned on this website. Consistent with applicable policies and procedures, Hunterbrook Capital may establish, modify, or close positions in covered securities before or after the publication of any Hunterbrook Media article. Following publication of any article, Hunterbrook Capital will continue transacting in covered securities for an indefinite period and may be long, short, or flat at any time thereafter, regardless of any position described at publication. Hunterbrook Media has no obligation to update any article or disclosure to reflect subsequent changes in Hunterbrook Capital’s positions.

Nothing on this website constitutes investment advice, a recommendation to buy, hold, or sell any security, or a solicitation to purchase or sell any securities. No securities shall be offered or sold in any jurisdiction where such activities would be contrary to applicable securities laws. Hunterbrook Media is not a registered investment adviser in the United States or any other jurisdiction. Nothing herein should be construed as investment advice or a recommendation of any kind. This information should not be relied upon as a substitute for independent research or professional financial, legal, or tax advice.

This website may feature forward-looking statements reflecting Hunterbrook Media’s current views. Such statements, identifiable by terms including but not limited to “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “should,” and “will,” are inherently speculative and subject to risks and uncertainties. Actual results or outcomes may substantially deviate from those projected. Hunterbrook Media expressly disclaims any obligation to update or revise any forward-looking statements, regardless of subsequent developments or new information.

The information presented is current as of the date indicated. No representation regarding the completeness or timeliness of this information is made. Some information is sourced from third parties and, while believed to be reliable, has not been independently verified, and its accuracy or completeness is not guaranteed. Hunterbrook Media is not affiliated with any sites linked to this website. Investment in securities and other financial instruments involves significant risk, including the potential loss of principal. Users are advised to conduct their own due diligence and consult professional advisors before engaging in any investment activity. Use of Hunterbrook Media’s content is entirely at the user’s risk. Users shall not use this site for any illegal or prohibited purposes and shall comply with all applicable local, state, national, and international laws and regulations.

Should any provision of these Terms of Use be adjudged invalid or unenforceable, the remaining provisions shall remain in full force and effect. Trademarks contained in links to third-party websites belong to their respective owners. Hunterbrook Media retains copyright on all text, content, graphics, and trademarks displayed on this site.

By Sam Koppelman

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, does not have any positions related to this article at the time of publication. Positions may change at any time. Full disclosures on our website.

Earlier this year, Pablo Torre Finds Out won the Pulitzer Prize for its reporting on NBA superstar Kawhi Leonard’s secret, no-show endorsement deal with a tree-planting company called Aspiration, whose big investor just so happened to be the richest owner in American sports: Steve Ballmer.

The scandal: Ballmer, who signed Leonard to the L.A. Clippers after a competitive free agency process, apparently used Aspiration to circumvent the NBA’s salary-cap restrictions meant to limit how much billionaires can pay to win. Ballmer has denied the accusations amid an NBA investigation led by the law firm Wachtell, Lipton, Rosen & Katz.

Hunterbrook has worked with PTFO since we first launched: exposing how Phoenix Suns owner Mat Ishbia deceives American homebuyers (a very relevant story today!); tying Memphis Grizzlies owner Robert Pera to Russian “crimes against humanity”; and, somehow, gaining access to the contents of a group chat in which Phil Mickelson seemed to be sharing inside information on a California oil stock.

Today, we join Pablo Torre for the next chapter of the Kawhi Leonard story, revealing what sources describe as a hidden, multimillion-dollar “sponsorship” deal — this time, with a publicly-traded company: Daktronics (DAKT).

For over half a century, Daktronics has built scoreboards for sporting venues and public places. One of its biggest deals, announced in 2022: The Halo Board at the Clippers’ new Intuit Dome, owned and financed by Ballmer.

The Clippers account came at a pivotal time for Daktronics, whose auditor-board chair warned in 2023 that there was “substantial doubt” about the company’s ability to continue as a going concern. “In our 54-year history, we have not been faced with the perfect storm that these last two years represent,” the company’s then-CEO said in an earnings call.

Even the following year, when Daktronics was on stronger financial footing, it would have been a weird time to sign an endorsement deal, let alone one from which it’s unclear the company got anything in return. Hunterbrook has torn through the internet and has not found a shred of evidence that Leonard performed any work in exchange for his alleged agreement with Daktronics.

In the years since the Intuit Dome deal, Daktronics has seen its stock soar more than 500%.

As the kids say: Scoreboard.

Asked repeatedly for a comment explaining the alleged deal, Daktronics declined, after initially responding through a crisis communications firm, which confirmed the company had been contacted by Wachtell as part of its investigation, while also stating that Daktronics doesn’t have a contract with Leonard “right now.”

Again and again, we asked the firm whether it could provide evidence that Leonard performed services for Daktronics. We were met with silence. We’d love to better understand this story. There are more questions than answers. Daktronics has just declined to help us answer them.

Watch the full episode:

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, does not have any positions related to this article at the time of publication. Positions may change at any time. Full disclosures on our website.

By: Wendy Nardi, Nick Chrastil, Michelle Cera

Editor: Jim Impoco, Vikas Kumar

On October 21, 2025, at 9:44 a.m. local time, a single-engine Cirrus SR22 fell from the sky.

Heading to the Ruston, Louisiana, airport, the pilot radioed for another approach and said he was “hand-flying” the plane.

That was the last communication. The plane looped around the dense woods, banked left, hit a 60-foot tree, and crashed, gouging a trough in the ground and bursting into flames.

The plane was registered to Louisiana private prison company LaSalle Management, and flying it was Rodney Cooper, who helped run Texas corrections before becoming LaSalle’s executive director.

Local Sheriff Andy Brown later told reporters Cooper had been on his way to work. “Wasn’t much left of the plane,” Brown said.

For years, Cooper had been the public face of LaSalle. When lawmakers demanded answers about abuses in private prisons, Cooper was the one who showed up on Capitol Hill. His death brought the family pulling the strings out from the background. Steering the company all along was Billy McConnell, a quiet patriarch who co-founded LaSalle and, by his own account, “oversees all aspects of LaSalle’s operations.”

While Cooper took some public heat, McConnell and his family quietly expanded their privately held, multimillion-dollar correctional empire. Last September, ICE set up a high-profile detention wing nicknamed the Louisiana Lockup at the Louisiana State Penitentiary at Angola. LaSalle bagged the contract, a deal that cemented its position as a state favorite and a beneficiary of the Trump administration’s $113.5 billion ICE detention push.

Today, ICE money is turbocharging LaSalle’s operations. Using complex intergovernmental service agreements, LaSalle partners with small-town sheriffs and rural municipalities to run multijurisdictional prisons that operate with little oversight.

Sometimes LaSalle builds the prison from scratch; other times it just assumes operational control. It pockets profits — and often restricts access to the prison complex.

And people are dying in its custody.1

A monthslong Hunterbrook Media investigation reveals this secretive family has built a liability moat — a sprawling multimillion-dollar private prison enterprise hidden behind nearly 80 opaque LLCs that we could identify. Among our key findings:

• Opacity: Unlike publicly traded competitors CoreCivic ($CXW) and The GEO Group ($GEO), LaSalle is privately held and resists disclosing financial data. When families sue over allegedly preventable inmate deaths, LaSalle’s lawyers claim “LaSalle Corrections” is a mere “trade name,” trapping legal claims inside the local LLCs that actually own or run facilities and limiting claimants’ ability to hold the people in charge to account.

• Self-Dealing and Vertical Integration: The family often captures additional revenue by subcontracting services such as prison commissary, phone systems, and transport to their own side companies.

• Deep Political Entrenchment: Through campaign contributions and lobbying, the family has built an influence network from rural Louisiana all the way to Capitol Hill.

• Expanding into High-Risk ICE Operations: Despite a spate of oversight failures and recent detainee deaths, LaSalle is expanding its footprint, taking over specialized ICE facilities, including a controversial new staging site at England Airpark for families and unaccompanied children.

By trapping legal accountability inside individual LLCs while routing profits through a web of family-owned holding companies, LaSalle has constructed what amounts to a legal and physical blackout zone. “If you can just create some minor differences,” Peter Oh, a business law professor at the University of Pittsburgh School of Law, told Hunterbrook in an interview, “it’s enough basically to create this wall of limited liability that partitions all the assets and liabilities away.”

THE SHELL GAME

Erik Carlson, a 29-year-old pretrial detainee, was incarcerated at the LaSalle Correctional Center in Olla, Louisiana. After his death on January 25, 2025, his family filed a federal lawsuit alleging he died from complications of strep throat that prison staff failed to treat. The lawsuit names LaSalle Corrections, LaSalle Management Company, and the LaSalle Correctional Center among the defendants, calling them “LaSalle.”

LaSalle lawyers fought back. In a brief filed in April, they sought to have the case dismissed because specific facts had not been alleged against each LLC separately. Their claim? That the plaintiffs’ legal team “impermissibly group three separate defendants together and make collective allegations against that group.” It’s a familiar move for LaSalle attorneys.

LaSalle Corrections holds itself out to the public as a family-operated private prison company headquartered in Louisiana. According to its website, LaSalle “and its affiliates” manage 18 corrections facilities in several states that can house over 13,000 people. News outlets refer to it as a company, and its employees say they work for one.

But when LaSalle is sued, say, for an allegedly preventable death at one of its facilities, its lawyers fight the notion that the organization is an integrated whole. They claim that “LaSalle Corrections” is just a trade name “widely used to refer to various LaSalle-branded entities,” a loose set of independent LLCs with seemingly with no centralized oversight or parent entity that can be held responsible.

The defense is built into LaSalle’s corporate architecture. When LaSalle gets a contract to manage a new facility, it often creates a whole new LLC. For instance, when ICE tapped LaSalle to operate the immigration detention facility within the Louisiana State Penitentiary at Angola, LaSalle officials created a brand-new company called the ICE 47 Processing Center LLC to hold the contract.

By structuring LaSalle as a loose group of LLCs, the company’s owners obtain liability protection similar to that of a corporation. The arrangement brings other benefits, too: LLCs use pass-through taxation, meaning income flows to owners’ personal returns instead of being taxed at the LLC level first. “I think the tax advantages for them are probably significant,” Oh told Hunterbrook.

And because state laws grant owners wide latitude in drafting LLC operating agreements, those documents can be written however the owners prefer.

“You can shape it however you want,” Oh said. “You could actually create an LLC and say there are no fiduciary duties whatsoever.”

Of course, many organizations use LLCs to limit liability; as the term “limited liability company” suggests, that’s one of the primary reasons this type of entity exists. But LaSalle is not just any organization: Its core business is incarceration. Based on Hunterbrook’s review of a decade of litigation, LaSalle has regularly used its opaque operating structure to avoid liability and prevent plaintiffs from getting insight into the broader organization. The upshot: Plaintiffs don’t know whom to sue, and the opacity complicates discovery into the company’s structure and finances. Theoretically at least, the LLC structure could even let LaSalle strip assets from individual entities, blocking any meaningful financial recovery or accountability.

At first, LaSalle might seek to have a case dismissed, alleging the plaintiff named the wrong entity. The company also resists discovery that would give plaintiffs insight into its inner workings. Those are temporary hurdles plaintiffs have to overcome. But even when a plaintiff sues the right party, we found, LaSalle has tried to confine liability to the entity that operates the facility.

Dustin Rowland sued after being denied medical care for a hernia while in custody at the LaSalle-run Fannin County Detention Center in Texas. LaSalle tried to get the lawsuit dismissed because Rowland had failed to name another LLC, LaSalle Corrections West, that held the contract to operate the jail.

In response to the motion to dismiss, Rowland’s lawyer wrote, “it is obvious that LaSalle Corrections proudly claims to be one enterprise,”2 noting that nowhere in the company’s marketing is there a disclaimer that it is “actually a conglomeration of independent corporations.”

The family of Jaleen Anderson, who died in 2024 after being held at LaSalle Correctional Center in Olla, Louisiana, hit the same wall. In a motion to compel discovery3 regarding LaSalle’s corporate structure, the lawyers wrote, “LaSalle has repeatedly evaded this discovery.”

“They don’t say exactly what each corporation does in a very complex system … all operating out of this Ruston headquarters,” a lawyer for Anderson’s family said, as news outlet The Advocate reported on June 23. “Can these folks just sit here and just say, ‘You know, this man died, but you didn’t exactly name the right corporate entity, and therefore you’re out of luck?’”

The Anderson legal team has admitted that including LaSalle Corrections LLC, the trade name, as a defendant was a mistake. “The difficulty is that Plaintiffs do not yet know the identity of the entity or entities that should be named,” they said. “That is not for lack of trying.”

Plaintiffs who clear the procedural hurdles face a potentially bigger problem. LaSalle executives have testified that a separate entity, LaSalle Management, handles what they call “back office” duties for the various LLCs. These duties include payroll, human resources support, accounting, and legal services. They also include “plans for future operations” and “trying to collect bills,” McConnell testified last October. Theoretically, the company could move money into a specific LLC only as needed for a particular expense.

“We’re just going to keep moving all the different assets around,” Oh hypothesized, speaking generally about an organization with a complex LLC structure, not specifically about LaSalle. “Even if you do end up actually catching us, what’s going to happen is that we’re just going to tell you that’s fine. That’s the judgment, but the money isn’t there.” Oh described such hypothetical circumstances as “a red flag which says, ‘look this company was set up right only for the purposes of being a shell.’”

Louisiana secretary of state registrations belie the notion that all of these LLCs tied to the family are unrelated entities. The prison business LaSalle Corrections, for example, lists WMC Enterprises as a member, and WMC lists McConnell Southeast Holdings as a member. LaSalle Corrections and WMC Enterprises both identify William K. McConnell as the registered agent, with an address of 192 Bastille Lane, Ruston, Louisiana.

McConnell Southeast Holdings is also a member of the prison-services firms Correct Solutions and Correct Commissary, as well as low-income housing developer M&T Development. Similarly named McConnell Southeast Corrections is a member of prison LLCs LaSalle runs for ICE: Winn Correctional Center LLC, River Correctional Center LLC, Jackson Correctional Center LLC, and Richwood Correctional Center LLC. It’s also a member of LaSalle Management. But McConnell Southeast Corrections itself leads back to a single manager and registered agent, William K. McConnell, at the same 192 Bastille Lane address.

Despite the complex structure, documents obtained by Hunterbrook through public records requests appear to indicate that decisions come down from the top and that problems at the sites are reported upward.

For all the legal posturing, in other words, LaSalle is run by the family.4

“They are closely held and it is top-down. I don’t care what kind of image they try to project. They’re very tightly controlled,” Tom Aswell, whose public interest blog Louisiana Voice has covered LaSalle Corrections, opined to Hunterbrook.

The tells aren’t hard to find. The contract McConnell signed for the ICE 47 Processing Center LLC last August, for example, uses the 192 Bastille Lane address and contact email “billy@lasallecorrections.com.”

Similarly, a contract between the Jackson Parish sheriff’s office and “Jackson Correctional Center LLC” not only lists the 192 Bastille Lane address but also states that the LLC “agrees to arrange for housing for Jackson Parish pre-trial inmates at the LaSalle Correctional Center or any other facility managed by LaSalle Management Company, L.L.C.”

Another example: In a 2023 proposal to run the Jefferson County Downtown Jail in Texas, Billy McConnell described the company’s legal structure, saying LaSalle Corrections operated “under the following names: LaSalle Management Company, L.L.C., Southwestern Correctional, LLC, and LaSalle Southeast LLC with dba LaSalle Corrections.” The “Executive Summary” says LaSalle Corrections is “owned by William K. McConnell, Patrick H. Temple and their family members.”

“William (Billy) K. McConnell is Managing Partner of LaSalle Corrections and as such is the person responsible for making decisions as to matters relating to the referenced solicitation,” the proposal states.5

The contract to run the jail was awarded to LaSalle Corrections VI dba LaSalle Corrections.

Earlier, a Correct Solutions job bid stated that McConnell “oversees all aspects of LaSalle’s operations.”

Lately, the company’s legal armor has begun to show cracks. Last fall, a jury rejected LaSalle’s portrayal of itself as a collection of disparate entities and returned what lawyers for the plaintiffs called the largest award against a private prison company. Erie Moore, Sr., died after injuries received at the Richwood Correctional Center, run by the family’s Richwood Correctional Center LLC,6 and Moore’s family sued. The prison was a jail then but has since become an ICE detention facility. The jury awarded Moore’s family more than $40 million in damages and found that the companies were “a single integrated enterprise.”

“I have to feel like it’s a real stunning knockout punch to them,” Oh told Hunterbrook. “We know that you’re at the center of it and all of these different companies are all the same.”

After the jury returned its verdict in the Moore case, LaSalle tried to have it thrown out, claiming the evidence presented was “superficial.” In May, the judge reduced the award. Both sides have filed notices of appeal to the Fifth Circuit.

“A court has basically taken the step to say you can form as many LLCs as you want, but we’ve seen through what you are doing,” Oh told Hunterbrook.. As a result, “whatever liabilities are incurred by one LLC is going to apply to you,” he said. It’s possible “their house of cards is about to collapse.”

BUILDING THE BLACKOUT ZONE

In October 2025, Nora Ahmed, legal director of the ACLU of Louisiana, drove to LaSalle’s Jackson Parish Correctional Center with a court order to free a detainee, she told Hunterbrook in an interview. The prison was hours from her office, and she arrived late in the day. Instead of honoring the order, LaSalle staff kicked her off the property, she said. The ACLU of Louisiana posted a video about the incident to its Instagram page.

ICE didn’t clear it up until the next day, Ahmed told Hunterbrook. She said delays in processing releases are common. “If you come to Louisiana,” she said, “you come here to disappear.”

Geographic isolation forms the outer wall of the company’s accountability moat.

Four dedicated ICE prisons LaSalle runs — theWinn Correctional Center, Richwood Correctional Center, River Correctional Center, and Jackson Parish Correctional Center — sit in northern and central Louisiana, far from major cities. Camp 57 at Angola, nicknamed the Louisiana Lockup, is to the southeast, in a building at the notorious Louisiana State Penitentiary at Angola. Based on the July 9 average daily population totals at Trac Reports, Louisiana held about 7,680 ICE detainees, and LaSalle-run sites accounted for roughly 56% of that total, more than any other private prison company.

Inside the moat, conditions can be miserable.

Carla Hall, a nurse who worked at the Jackson Parish Correctional Center, told Hunterbrook in an interview that the prison had been crowded. “They were getting paid by the head,” Hall said. Sometimes “the facility officer had to come to help go through the intake process because it was so many coming in at one time.” Hall sued LaSalle for employment discrimination in 2021. Her case was dismissed with prejudice.

In 2020, the Government Accountability Project, a nonprofit that defends whistleblowers, wrote to Congress condemning the “ongoing gross mismanagement, dangerous practices, and compliance failures” at facilities like Richwood. Cooper was called before Congress to respond. “These deaths and illnesses were likely caused by LaSalle mismanagement,” read the GAP letter, which was entered into the Congressional record. It alleged that LaSalle failed to follow COVID-19 protocols or report or acknowledge deaths.7

Sources Hunterbrook spoke with emphasized that company leadership should be distinguished from the rank-and-file LaSalle employees, for whom the job could be an economic lifeline. “I think there are some people who don’t like the system, but then they choose that they’re going to be kind to people,” said Ahmed, who has visited LaSalle’s ICE prisons in Louisiana. “And then they know that there are other people who work there who are unkind to people.”

A former employee told Hunterbrook, on condition of anonymity, that when they worked at a LaSalle prison in 2021, they’d been properly trained. They worked nights as a certified nursing assistant and then a correctional officer. They described work culture as “one of the weaker points.”

Hall said of her time at Jackson Parish Correctional Center, “You had some good guards there and some good nurses.”

ICE has met with LaSalle repeatedly to discuss issues with its various operations — five times we found in 2024 alone. Those meetings do not appear to have led to meaningful changes in LaSalle’s operations.8

NBC News reported in July 2025 that detainees were going hungry at Winn Correctional Center, among other sites. In October 2025, USA Today reported that LaSalle served ICE detainees at Richwood food that was rancid or insufficient.

Then in June 2026, the Department of Homeland Security Office of Inspector General issued a damning report after a surprise inspection. Fridges at Winn were warm inside; water pooled on the floor; legal resources weren’t always clearly accessible; recordings of incidents had crucial gaps; and staff used “prohibited techniques,” including in one instance in which an officer stabbed a detainee in the thumb with a pen while trying to get them back into their cell. Two days after the report, Mamuka Artmeladze died at Winn, the “second detainee death in less than 2 months,” the AP reported, following the death in April of Alejandro Cabrera Clemente.

“This cannot be who we are,” U.S. Rep. Mark DeSaulnier said in a Facebook post after an ICE detainee lost her baby, possibly from a lack of prenatal care at Richwood.

It appears that LaSalle’s board of directors won’t be taking up any of these urgent matters. That’s because we weren’t able to find evidence of a board at all.

In a 2024 deposition, the late Executive Director Rodney Cooper was asked, “Do you report to a board of directors?” He said no and went on, “I’m not aware of a board of directors.”

Earlier that year, though, when deposed for a different lawsuit, he said he reported to “the board of people, I guess, that have LaSalle Corrections.” When asked who was on the board, he said he didn’t know. But he guessed Billy McConnell was on it.9

What does McConnell make of all the criticism? “What somebody else thinks about Billy McConnell compared with what God thinks of Billy McConnell is almost irrelevant,” McConnell told USA Today in 2019.

It seems possible McConnell answers to no one — at least, no one on earth.10

MEET THE MCCONNELLS

“Managing a detention center requires a dynamic mix of special skills and experience.” — LaSalle Corrections contract proposal

‍ “I’m not running a nonprofit.” — Clay McConnell, 2012, The Times-Picayune

Billy McConnell stood at the microphone on May 23, 2026, as keynote speaker for commencement at his alma mater, Louisiana Tech University. He wore a suit and tie with a golden cross hanging from his neck. He told the story of how his grandfather, a third-grader, also named Billy, was mocked for going to school barefoot. “He left that classroom that day embarrassed and humiliated and never returned,” McConnell told the graduating students. “He lived the rest of his life without a formal education.”

“And yet,” McConnell went on, “as I sat in his lap, he would tell me he was a millionaire” because he valued his family. McConnell also paid tribute to the late Rodney Cooper, describing him as “a great man.”

Billy McConnell remains the family patriarch. He founded and still appears to be involved in running the family business, which united his family with that of his late co-founder and brother-in-law, Patrick H. Temple. The family business headquarters appears to be 192 Bastille Lane in Ruston, Louisiana, with additional offices next door at 182 Bastille Lane. Correct Solutions is there, along with KPL LLC. The LaSalle empire of businesses also use addresses at 1910 and 1936 Farmerville Highway in Ruston, and more out of state. In 2024, LaSalle Regional Warden James McCormick said the corporate office was “the office for all of LaSalle’s operations combined.” LaSalle Management owns the property at 192 Bastille Lane, according to the Lincoln Parish Assessor’s Office.11

McConnell, now in his late 70s, grew up in rural Rayville, a northern Louisiana town of about 3,000 people. He attended Louisiana Tech, in Ruston, where he studied engineering, and where his college yearbooks show an undergrad with wavy hair and glasses. He joined a fraternity, Sigma Nu’s Eta Zeta chapter, as well as academic honor societies and the Wesley Foundation, a student organization that was affiliated with the United Methodist Church.

He went to work for Exxon and trained as a lawyer, then changed course to run his father’s construction business. From there, the family made the leap into prisons. McConnell co-founded LaSalle Corrections in 1997. “We realized that prisons are like nursing homes,” his son, Clay McConnell, told The Times-Picayune in 2012. “You need occupancy to be high. You have to treat people fairly and run a good ship, but run it like a business, watch food costs, employee costs.”

At first, the business apparently had a selling point: It showed a commitment to substance abuse treatment and re-entry programming, Robert Hanser, an associate professor at the University of Louisiana at Monroe, told Hunterbrook in an interview. Hanser worked with LaSalle’s Blue Walters substance abuse and re-entry program at Richwood Correctional Center around that time and became LaSalle’s director of offender programming. “They were really proud of that program,” Hanser said. “Sometimes I could go to them and say look I really want to do this, that, or the other, and this is where I think it’ll really help out,” he said. “They have no pecuniary interest whatsoever and they just go ahead and say, we can float that.”

LaSalle established relationships with local law enforcement. Johnny Creed, chief of operations for LaSalle Management, said in a 2018 deposition that he drove all over Louisiana talking to sheriffs who might need extra jail space and help “filling beds.” “The visit might be started off with a phone call,” Creed recalled. “I heard, you know, that a certain parish had incarcerated persons, something or other. I’d get up in the morning, you know, and take off.”

But eventually, LaSalle came to another fork in the road. ICE was paying rates several times what Louisiana paid to house prisoners. In 2019, LaSalle converted four major Louisiana prisons it ran into ICE detention centers: Winn, River, Jackson Parish, Richwood.

It also moved into prison-related services that are moneymakers in their own right. Correct Solutions Group offers payment services, phone services, tablets and kiosks, and commissary, as well as an “offender management system” and GPS tracking, according to the website.12 LaSalle Corrections offers transportation services, including with armed guards; commissary; construction; and administrative services.

LaSalle was becoming vertically integrated, capturing additional revenue flowing into the private prisons it ran through other companies the family owned.

A LinkedIn profile for Clay McConnell identifies him as “Managing Director at LaSalle Management.” He appears online as a religious speaker13 and also posts about hunting ducks. His name appears on company registrations for very few of the family LLCs.

But another name has been appearing on active registrations: Wesley McConnell, Clay’s brother. Wesley is a licensed CPA and real estate agent, and a principal partner of Whitetail Properties Real Estate, which sells hunting land. His LinkedIn profile reads “Co-Owner at LaSalle Corrections.” Wesley McConnell is listed as a SAM.gov contact for LaSalle Corrections V (which received a major DHS contract in May 2025), as well as LaSalle Corrections VI and McConnell Southeast Holdings. He is also president of the LaSalle Family Foundation, the contractor for a new ICE site at the England Airpark in Alexandria, LA.

He is also listed as a director of the private Guaranty Bank & Trust Co. of Delhi, Louisiana, according to the Louisiana Office of Financial Institutions. The bank’s annual report, signed March 7, 2025, shows the family owns about 11% of the bank’s shares. And the bank appears to hold accounts for some of their prison-related LLCs: It has come up in court as a bank used by Correct Solutions and possibly by LaSalle Management.14

MONEY MATTERS

LaSalle’s ICE contracts often result from intergovernmental service agreements, or IGSAs, that ICE sets up with state or local government agencies. IGSAs are a mainstay of ICE’s work with private prison contractors, according to the Government Accountability Office.

The agreement is a three-way deal: ICE signs an IGSA with a local government agency, and that agency signs a separate contract with the prison company.

And the local partners get paid. Under a contract obtained through a public records request, for example, LaSalle’s Jackson Correctional Center LLC (“JCC” in legal documents) agreed to pay the sheriff’s office a sponsor fee of $13,333.33 a month, or $160,000 a year, plus a per diem of $1.59 for each detainee. At 1,037 detainees in July, according to a detentionreports.com estimate, that would be about $600,000 a year more, bringing the total to almost $800,000 for the year. In an area with a limited tax base, such sponsorship fees can provide a significant part of the law enforcement budget.

That’s not the only way the family enterprise sends money flowing.

A handwritten note across the top of a lobbying disclosure form in a 2023 job bid stated, “LaSalle does not have any lobbying activity.” The page was signed by LaSalle Corrections Chief Financial Officer Tim Kurpiewski. The LLC web makes Kurpiewski’s denial possible: No entity named “LaSalle Corrections” needs to appear on a disclosure.

And yet Hunterbrook found extensive records of family entities lobbying in multiple states. LaSalle Corrections lobbied under its own name in Louisiana in 2014, and in Alaska in 2019 and 2020, according to state disclosures reviewed by Hunterbrook. LaSalle Corrections Management has lobbied in Arkansas.

Prison-related entity Correct Solutions has paid for dinner parties for sheriffs and their employees at the Arkansas Sheriffs’ Association Winter Conference — $21,809.39 in 2025 and $10,959.84 in 2026, according to ethics disclosures with the Arkansas secretary of state. Correct Solutions is listed as a client on the Gilmore website and has lobbied in Colorado, in Louisiana, and at the federal level, through Monument Advocacy.

Besides paying lobbyists, the McConnell family and its businesses keep money flowing through campaign contributions at the national, state, and local levels, Hunterbrook found. They give heavily, year after year, to candidates up and down the ballot: local sheriffs, governors, state senators and representatives, judges, district attorneys, the U.S. president, PACs, and other organizations.15

LaSalle Management, Correct Solutions, and the Jackson Parish Correctional Center, LaSalle Correctional Center, Richwood Correctional Center, and Winn Correctional Center have donated to the campaign of Louisiana Gov. Jeff Landry: almost $45,000 from 2021 to 2025, based on Hunterbrook’s investigation. Five different LLCs each contributed $5,000 to the campaign on the same day, May 24, 2023.

In June 2025, Landry appointed Billy McConnell to the Louisiana Commission on Law Enforcement and Administration of Criminal Justice as a “Person having Vital Concern w/ LCLE.” McConnell had apparently been part of Landry’s transition team, too, according to James LeBlanc, former secretary of the state Department of Public Safety and Corrections, who in a 2024 deposition said he’d met with McConnell in that capacity.

Meanwhile, contributions by family prison-related businesses have flowed to sheriffs, elected officials LaSalle does business with. In a typical scenario, the sheriff signs an IGSA with ICE and then has discretion over which prison company will operate the site.

Multiple Louisiana sheriffs have received contributions from McConnell LLCs, according to the Louisiana campaign finance portal. On September 4, 2023, River Correctional Center donated $2,500 to a local sheriff’s campaign. The very next day, so did LaSalle Management.

The money reaches all the way to the federal level. In Federal Election Commission records, family members who listed LaSalle entities as their employer gave generously to politicians and political groups.

Contributions also went to the war chest of U.S. Congressman Clay Higgins, a Republican from Louisiana who received tens of thousands of dollars from the McConnells between 2020 and 2025 through “Captain Higgins for Congress,” the “Higgins Victory Committee,” and his affiliated Redemption PAC. Toward the end of that time, LaSalle was slated for expansion at the Airpark.

THE AIRPARK

“If we want AEX to be known as Auschwitz International Airport, just keep going.” Angela Hayes, a local resident, stood at the microphone and said she “hadn’t planned on speaking” but felt that a private company profiting from the new family and children’s deportation staging facility ICE plans at the Airpark would be “morally reprehensible.” The moment was captured on a video posted to the website of the England Airpark board, officially named the England Economic and Industrial Development District, or EEIDD, on March 26.

“It’s morally repugnant,” said Dr. David Holcombe, medical director of the Community Healthworx, at the meeting. “I do immigration exams for legal citizens and some that are prisoners,” he said. “They are in terrible shape. They’re in total distress. They’ve been picked up all over the United States and dumped here.”

ICE is calling the new site a “staging area,” and the LaSalle Family Foundation of Ruston, Louisiana, is the contractor, the AP reported July 6. Airpark officials say it’s for self-deporting families and unaccompanied children.

Local residents and human rights activists have been protesting the new facility. On July 31, the National Immigration Project and other organizations published an open letter to the EEIDD board of commissioners, asking them to cancel contracts for the site. “This Is a Detention Center Operating as a Punitive Carceral Facility—Not a Residential Humanitarian Center,” the letter read. It went on, “The proposed facility is slated to be operated by the LaSalle Family Foundation, an organization with direct ties to LaSalle Corrections, a private prison company repeatedly criticized for allegations of abuse, retaliation, and neglect.”

That same day, Airpark officials published an open letter in local news outlet The Town Talk responding to recent reporting about the Airpark, including the new ICE site. “Facilities associated with Immigration and Customs Enforcement are operated by independent entities under federal oversight, not by the EEIDD,” the letter reads. “Likewise, the proposed self-deporting migrant family processing center would be operated by an independent tenant. According to information provided by the prospective operator, the facility is intended to function as a short-term processing center, not a prison, as some have incorrectly claimed.”

ICE already runs what has been reported as its main U.S. deportation hub at the Airpark. The site falls under the oversight of the ICE New Orleans field office.

“You can hear it everywhere. You can hear these big planes peeling out, right?” Holcombe told Hunterbrook in an interview. “Everybody in the community knows it’s happening.”

Activists have denounced the site’s lack of transparency for years. In a 2023 FOIA request to ICE, Robert F. Kennedy Human Rights and the ACLU of Louisiana, along with the New York Civil Liberties Union, said the site was being called a “black box” and demanded a count of how many people were inside the building. “ICE frequently holds detainees at Alexandria for extended periods,” the request read, “without adequate medical care, disability accommodations, and language access services.”16 That year, a Prison Rape Elimination Act auditor found the Alexandria staging facility failed to comply with 13 standards that required corrective action. ^‍

The next year, LaSalle signed the lease for a building right on the tarmac. It’s a nondescript structure at 1113 Billy Mitchell Blvd., based on the Airpark website. The company helps out at the GEO site, Airpark Deputy Director David Broussard told the board last April.

The lease said LaSalle planned to add “a new portico on the tarmac side of the Leased Premises.”

Documents the Airpark provided in response to a public records request suggest LaSalle had permission to temporarily hold people inside the building it rents, including for booking and intake, or “processing.” There are indications in the contract that it could be used to house and ultimately deport immigrants. First, section 3.1 details the use of the leased premises and states that the premises should be used as a “temporary holding” facility “providing immigration transport services to the U.S. Government.”

Second, the Airpark is required to provide LaSalle with access to the premises 24/7/365 for LaSalle’s “employees, agents, invitees,” and importantly, “individuals in Lessee’s custody.”

Finally, LaSalle planned to renovate the facility to add “security features, including a security gate and sally port area.” A sally port is a “security vestibule” often used for prisons and jails to control access. It sets up a series of secure doors, only one of which opens at a time.

An informational slide with the ICE logo at the top, also provided by the England Airpark, reads: “LaSalle Corrections Transport: $5 Million Dollar investment in building renovations for a processing facility at England Airpark.” It’s unclear what “processing” may involve. But the company said it will have 75 employees at the “England Airpark facility,” open every day of the year.

‍The LaSalle Corrections name and logo are already on the Airpark’s “tenants” page.

The Airpark is run by the England Economic and Industrial Development District, built on the site of a former military base that is now its own political entity. Amid controversy over a proposed data center at the Airpark, and public protests about ICE, the board approved LaSalle’s deal for the new site earlier this spring. The parcels involved are a barracks at 1603 Frank Luke Blvd. and an office building at 1406 Van Gossen Drive, on either side of the main road leading into the airport, according to Google Maps, plus about 10 acres of property, according to the video posted of the February board meeting.

LaSalle Corrections will run the new facility, the AP reported July 6,17 while the LaSalle Family Foundation of Ruston, Louisiana, has a cooperative endeavor agreement with the Airpark for the site, the Airpark confirmed. The nonprofit foundation said on its 2024 IRS Form 990-PF that it sends chaplains into LaSalle prisons. Its officers and directors include Billy McConnell, Clay McConnell, and Wesley McConnell, who also serves as president and receives grant applications at his LaSalle Corrections email address.

“The LaSalle group has a very sinister reputation,” Holcombe told Hunterbrook in an interview.

On a recent visit, the Airpark resembled a suburban housing development, with well-maintained lawns, clean streets, and a golf course. Decorative statues of Air Force fighter jets stood in the grassy medians. But down a few side streets near the Alexandria International Airport was a fenced-off area of tarmac with trucks, buses, and groups of people being loaded onto planes. Signs warned: “No Stopping. No Standing. No Parking.”

Sen. Ron Wyden, who is on the Senate Finance Committee, complained about the opacity surrounding the new LaSalle site in a June 3 letter to the Administration for Children & Families. “A federal facility designed to hold children and families in federal custody cannot be stood up in secrecy,” he wrote, noting the absence of public announcements or licensing steps. “Whatever ACF is preparing to do at Alexandria, the Finance Committee, the public, and the children themselves have a right to know about it.”

“It’s a prison,” Frances Kelley, who works with Louisiana Advocates for Immigrants in Detention, a volunteer organization that assists immigrants in detention and their families, told Hunterbrook in an interview.

“The people that are going to be in the detention center at the airport are going to be already in ICE custody and they’re going to be choosing to be there versus fighting their case in immigration court,” Kelley said. “And if they were fighting their case in immigration court, they would be detained the entire time. So that’s the real choice that they’re making.”

“They’re not going to let people walk out of that building,” Kelley said. “ICE does not let people go, especially now. They don’t let people go.”

Based on videos posted to the England Airpark website, Executive Director Ralph Hennessy and others had been meeting with federal officials since at least 2024 to discuss expanding the roles of ICE and LaSalle at the Airpark. In an email to Hunterbrook, Hennessy explained that the Airpark has “not led any efforts to expand ICE or LaSalle’s presence here. We have merely responded to their requests to expand their operations at the airpark.”

In a May 20, 2024, email Hunterbrook obtained through a public records request, Broussard told Hennessy, “Ralph, Attached is the piece we brought and left with Cong. Higgins staffer,” with the 2024 GEO-LaSalle document attached. Outlining points about the site, he said, “GEO handles housing and ground transportation not flights,” and “LaSalle also only houses and transports. Operates in multiple states.” He emphasized, “No children or women housed at GEO or LaSalle facilities at England. Women transported same day from other facilities and moved directly to planes. No children are processed or detained at anytime.”

He assured Hennessy that detainees were only convicted felons who had already been adjudicated and “come in from all parts of the country” for a 72-hour stay at most. “ASF has no barbed or razor wire,” he wrote, referring to the Alexandria Staging Facility. “Facility blends with activities on ramp.”

On a May 23, 2024, video, Hennessy told the board his team had met with Higgins’ staff in Washington, D.C. “regarding the ICE facility and The GEO Group and LaSalle and what we have here, because he sits on Homeland Security. And it’s something that we felt like he should be interested in … even though we’re not in his district.”

Higgins recommended meeting with Homeland Security Committee staff, Hennessy said. “We walked into a room with eight to 10 people, with everyone from the Coast Guard to Border Patrol and Customs and a number of other entities within Homeland Security,” Hennessy told the board, as he confirmed in an email to Hunterbrook. “They were very intrigued. Uh, they liked hearing what we had to say. They asked a lot of questions.”

By January 30, 2025, Hennessy reported that he’d been advised, “There’s a possibility that the operations here could double.”

Hennessy told the board, “We met with Congressman Higgins and his staff while we were in D.C. last week and and Congressman Higgins would love to flow everything through AEX. Why Congressman Higgins? Because he’s on Homeland Security and that’s that’s what oversees that. He was pretty blunt and said, ‘Look, I if I get my way, you all are going to get sick and tired of everything coming to Alexandria and you’re going to call and beg me to turn it off.’”18 In an email to Hunterbrook, Hennessy said that this was “something he mentioned to me at a social event,” and pointed out that Higgins is “no longer on Homeland Security.”

Given the competition between companies for ICE money, Hennessy said, they’d consulted with Higgins so he could “make sure that flows here instead of some of these other states.” He told the board, “LaSalle has their own prison network that they [store] prisoners there. They move them here by bus, put them on the airplanes with the GEO prison.” In an email to Hunterbrook, Hennessy said that he had “crossed paths with” Higgins at a social event but had meetings only with his staff.

At an April 24, 2025, meeting, based on the video, Airpark Deputy Director David Broussard told the board, “LaSalle Corrections, which is out here at the Airpark and of course supports the GEO ICE cluster that’s happening here,” had submitted a proposal for a major new project to the DHS that could involve multiple buildings. “We’re kind of in the wait and see mode,” he said. Meeting minutes confirmed LaSalle was looking to expand.

Broussard reiterated on November 20, 2025, “I’ve been working on a pretty, uh, good expansion project for LaSalle Corrections who currently leases a building on the flight line.” By January 22, the Airpark and LaSalle were apparently “putting together a proposal packet to go to ICE for their approval,” Hennessy said.

At a February 26, 2026, board meeting, Hennessy confirmed LaSalle’s presence at the staging area, explaining the new family site’s deportation planes would be “the flights that, that are already, um, being utilized by the GEO Group and LaSalle for, for the other deportations.”

Discussions of the new family site continued this spring.

We reached out to LaSalle executives for comment about the findings in our article. Senior Corporate Counsel Leah Sumrall wrote back, “We appreciate your interest in our organization and the work we do. Please be advised that a significant amount of the information you plan to report is inaccurate.” LaSalle did not respond to multiple follow-up inquiries about any specific inaccuracies in Hunterbrook’s reporting.

We also contacted The GEO Group, Congressman Higgins, Gov. Landry, and ICE. None provided substantive responses as of press time.

Meanwhile, in another sign of its closer ties with ICE, LaSalle has been hiring contract process officers to work directly with ICE at field offices and detention centers in various states. The job involves helping with “removal planning,” as well as travel, transportation, and repatriation planning.

And last year, LaSalle Corrections V won a contract directly with ICE. It’s an open-ended vehicle that allows payments up to $125 million to the company for “detention and related services for aliens in immigration and customs enforcement custody,” both “within and outside of the contiguous United States.” So far, based on government records at SAM.gov and USASpending, it’s unclear whether the money has been allocated.

“So, you’re put in immigration detention,” Ahmed told Hunterbrook. “Your commissary is so much more expensive. You’re only allowed to go outside once a day for an hour, but that can be suspended at any point in time for any reason. You’re now stuck in a room between 50 and 70 people with, six to seven open showers where people are defecating and you can smell that in the room. You are freezing cold, like, the lights are on. It is just an environment that assists people in really losing their ability to live.”

“People can handle it for about three and a half months and then they can’t do it anymore,” Ahmed said. “They’ll take voluntary departure.”

Day after day, week after week, the planes taxi — and take off.

Author

Wendy Nardi joined Hunterbrook after working as a developmental and copy editor for academic publishers, government agencies, Fortune 500 companies, and international scholars. She has been a researcher and writer for documentary series and a regular contributor to The Boston Globe. Her other publications range from magazine features to fiction in literary journals. She has an M.A. in Philosophy from Columbia University and a B.A. in English from the University of Virginia.

Nick Chrastil is a reporter in New Orleans. He previously covered criminal justice for The Lens.

Michelle Cera trained as a sociologist specializing in digital ethnography and pedagogy. She completed her PhD in Sociology at New York University, building on her Bachelor of Arts degree with Highest Honors from the University of California, Berkeley. She has also served as a Workshop Coordinator at NYU’s Anthropology and Sociology Departments, fostering interdisciplinary collaboration and innovative research methodologies.

Editor

Jim Impoco is the award-winning former editor-in-chief of Newsweek who returned the publication to print in 2014. Before that, he was executive editor at Thomson Reuters Digital, Sunday Business Editor at The New York Times, and Assistant Managing Editor at Fortune. Jim, who started his journalism career as a Tokyo-based reporter for The Associated Press and U.S. News & World Report, has a Master’s in Chinese and Japanese History from the University of California at Berkeley.

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor’s from Emory University. Vikas is based in Maryland.

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By: Dhruv Patel

Editor: Vikas Kumar

• Hunterbrook compiled a record of Bloom's fuel cell performance from public data spanning 15 years: government datasets across the U.S. (New York, Delaware, California) and South Korea, as well as self-reported federal filings covering 126 plants in nine U.S. states.

• Across the datasets, the fuel cells’ measured efficiency appears to fall below Bloom’s disclosed benchmarks before the five-year replacement interval the company claims. In New York, Hunterbrook calculated that all 37 systems fell below Bloom’s efficiency benchmark at a median of 20 months, with only one declining slowly enough to be on pace to stay above it for five years. In California, 105 of the 231 projects with usable fuel data recorded at least one month below the level at which a 2025 contract requires Bloom to repair or replace the system. And even on cumulative lifetime efficiency, the measure Bloom most typically uses, 44 of the 126 plants in the federal record fall below the guarantee line.

• Bloom’s 95% output benchmark — a measure of how much electricity the cells actually produce against their rated capacity — was missed almost everywhere, almost always: 152 of 156 months in Delaware, 97.4% of months in California, and 22 of the last 24 months at one of Bloom’s largest continuously metered Korean plants.

• The public data is reported daily or monthly, so Hunterbrook uses those intervals to track the timing and persistence of underperformance — not to determine any potential contractual breach, which may be assessed monthly, annually, or cumulatively depending on the contract.

• A part-owner of a Bloom project in New York told Hunterbrook the company paid their group a multimillion-dollar contractual penalty after failing to meet one of its guarantees.

• Some customers report adequate performance: One said Bloom “remains in compliance with our contract,” and a California operator called their project “fairly reliable,” but won’t buy more, citing price. Other customers said they no longer work with Bloom.

• Hunterbrook’s findings directly implicate Bloom’s data center ambitions. Based on these numbers, fuel cells may be a less attractive alternative to grid power and gas turbines than they appear on paper: Given the consistently low efficiency and output numbers across Bloom’s projects, data center operators would likely have to use more gas and install more fuel cells (and replace them more frequently) than typically modeled to reach the desired capacity. It’s, perhaps, one explanation for why Bloom has only named several partners.

• Bloom did not reply to Hunterbrook’s repeated requests for comment for this article. After Hunterbrook published its prior investigation, Bloom filed an 8-K form with the SEC as a rebuttal, claiming it “categorically rejects the Report’s claims regarding the Company’s financial results and accounting.”

It’s always been a good story: a box that turns gas into electricity through a chemical reaction, with no combustion required.

Since the early 2000s, that has been Bloom Energy’s ($BE) promise — and it’s one fit for the AI era as data center developers scramble to improve what they call “time to power.”

Earlier this year, Bloom briefly reached a market cap of about $100 billion, with the stock up roughly 1,000% over the preceding 12 months. This came as Bloom announced splashy deals with partners like Oracle, which agreed to purchase up to 2.45 gigawatts of fuel cells for its flagship site in New Mexico.

This month, Hunterbrook reported cracks in Bloom’s story, including the company’s sourcing of a key rare earth ingredient, scandium, from China, a practice the company has repeatedly and publicly denied. Hunterbrook also detailed delays across Bloom’s biggest planned projects, at least one of which has wobbled further in recent weeks.

But beyond those headwinds lies a more elemental question, which Hunterbrook has investigated through state regulatory filings, foreign generation data, and interviews with Bloom customers and former employees.

Do the fuel cells actually work as advertised?

The answer appears to be no — at least according to the data.

That could present a big problem for Bloom’s data center ambitions.

None of the Bloom deployments in the public record approaches gigawatt data center scale; the largest sites Bloom has disclosed anywhere are a pair of 40-megawatt plants in South Korea.

The AI commitments are of a different order: Oracle’s Project Jupiter arrangement alone is 10 times the size of Bloom’s entire metered U.S. fleet.

On Tuesday’s earnings call, CEO KR Sridhar listed “reliability without overbuild” among the capabilities that other commercial vendors cannot provide. The public record Hunterbrook analyzed points the other way: Across the metered fleet, Bloom’s fuel cells have typically delivered 80 to 90% of rated output, below the 95% number Bloom has cited in the past as its typical benchmark. This means a data center operator would need to install more units and replace their stacks more often than Bloom’s previous disclosures might suggest.

If the company’s existing deployments have had problems, what does that mean for data centers requiring an order of magnitude more power, at facilities where a missed output guarantee doesn’t mean a contractual penalty but, absent costly backup, downtime for the most expensive computers on earth?

It’s a question that comes at an interesting time for Bloom. One of its largest known shareholders earlier this year was the hedge fund Situational Awareness, led by Leopold Aschenbrenner. Today, the Financial Times reported that the fund has been sold to Citadel amid a rout in its AI positions.

The Promise

On the earnings call, Sridhar said the company “kept the promise that we make to our customers. Bloom will not be your bottleneck. We will deliver power at AI speed and enable our customers to grow.” The metered record suggests that the risk isn’t whether Bloom can ship its boxes to customers quickly, but rather how those boxes perform once they are running.

While each Bloom contract is individually negotiated, the company has periodically provided windows into the typical levels of efficiency, output, and durability it promises its customers. The benchmarks we use for our analysis are derived from those disclosures, found in a 2018 filing, a 2019 technical note, a 2021 SEC filing, and a 2025 purchase order from Fresno County, CA. The key metrics:

1. Efficiency guarantee: 46.9%. Efficiency measures the percentage of the energy in the gas fed to the box that comes out as electricity, and directly feeds into a customer’s fuel bill per kilowatt-hour. The most recent publicly available Bloom purchase order Hunterbrook identified, signed with Fresno County, CA, in 2025, guarantees that number will be at least the equivalent of 48.8%.1 According to that contract, if, at the end of each calendar year, the system’s cumulative efficiency is below that number, Bloom must pay liquidated damages. Earlier filings disclosed that its contracts typically set the efficiency benchmark at the equivalent of 46.9%, and to be conservative our analysis tests the fleet against that older, lower number. We call this benchmark the “guarantee line” throughout this article.

2. Replacement floor: 45.2%. The Fresno agreement separately requires that if cumulative efficiency, measured at the end of each calendar year, drops below this benchmark, Bloom must repair or replace the system within 90 days. We call this the “replacement floor.”

3. Output guarantee: 95%. Each installed Bloom system has a rated maximum output, known as its “nameplate capacity.” The company has disclosed that it typically guarantees the system will deliver 95% of that rating, measured annually.

4. Time between fuel cell component replacement: ~5 years. Bloom’s 2018 IPO prospectus told investors that in the early years, the period between stack replacements “was typically 12 to 18 months,” but that “from 2017 onwards we expect to average over five years between replacements.” When Hindenburg Research challenged that math in September 2019, Bloom responded that its latest-generation fuel cells shipped from 2016 to 2018 “have an average life of 4.8 to 5.2 years,” and published a technical note claiming median time to replacement had improved from 1.9 years for its 2011 vintage to 4.7 years for its 2015 vintage.

Since 2021, Bloom’s regular SEC filings have stopped reporting the specific output and efficiency levels its contracts guarantee, so these sources represent the best publicly available record of what Bloom is promising its customers.2 Notably, between its 2024 and 2025 Impact Reports, Bloom made its language regarding the life of its fuel cells more conservative. In 2024, the company said: “We predict 2024 fleet medium time to refurbishment as 5 years.” In 2025, the company deleted that language, saying only: “As our fuel cells age, efficiency decreases, and replacements are made.”

And Bloom’s real-world performance can be tracked and compared to these benchmarks via the fleet the company has already deployed: at Home Depots and hospitals, malls and utility substations, in New York, Delaware, California, and South Korea, and as supplemental power for a handful of Equinix’s legacy data centers.

Much of that fleet happens to be metered by governments and state-owned utilities, so the numbers are public.

Hunterbrook compiled five of those public datasets:

• South Korea: Hourly output from Korea South-East Power’s 8.35-megawatt Bundang Phase 6 plant, commissioned in April 2019, covering January 2022 through June 2026; plus monthly output and efficiency data from Korea Southern Power’s Yeongwol plant and Korea East-West Power’s Honam and Bukpyeong plants. Hunterbrook calculated Yeongwol’s efficiency from reported generation and gas consumption; Honam and Bukpyeong’s efficiency figures were calculated and published by the utilities. A separate daily Korea East-West Power file extends the Bukpyeong record through mid-2025.

• New York: Daily NYSERDA meter readings from September 2014 through December 2025, covering efficiency and output for 37 Bloom systems.3

• Delaware: Monthly filings with the Delaware Public Service Commission from June 2012 through May 2025 — 156 consecutive months — including efficiency and output data for the roughly 30-megawatt Bloom fleet serving Delmarva Power. This fleet was updated with newer models in 2019.

• California: Monthly Self-Generation Incentive Program reports from December 2012 through October 2023 (a handful of later biogas projects extend into 2025), containing efficiency and output data for 234 Bloom projects and roughly 14,100 project-months.

• United States, National: Monthly net-generation and gas consumption data reported to the U.S. Energy Information Administration from 2011 through December 2025, covering 126 installations Hunterbrook verified as Bloom installations.

To be clear: as we said above, a meter reading below one of Bloom’s guarantee lines on a given day or month does not necessarily imply a contractual breach. We do not know the specifics of the guarantees in each Bloom contract. And the company has disclosed warranties measured monthly or quarterly, as well as performance guaranties measured annually or cumulatively. Hunterbrook uses the daily and monthly readings to track when performance declines and how long it remains below Bloom’s disclosed levels — not to determine whether every individual reading breached a particular contract.4

Measured on the cumulative efficiency metric Bloom typically uses, most systems remain above the guarantee line, though 44 of the 126 Bloom systems in the federal record fall below the guarantee level even on that measure.

But cumulative efficiency can hide the repairs and replacements required to keep that average afloat. A fresh stack would lift current performance while the system’s stronger early years stay baked into the lifetime calculation. So a passing average can conceal hardware wearing out far faster than Bloom says it should.

Taken together, the monthly meters show what the cumulative numbers obscure: Efficiency falls to Bloom’s guarantee line within roughly two years, then flattens or rebounds in patterns consistent with repair or replacement. The lifetime average may still pass, but the hardware appears to be wearing out years before Bloom’s claimed five-year replacement interval, which could pose a serious risk to the unit economics of the company’s servicing business.

South Korea

South Korea is Bloom’s largest market outside the United States, using about 682 megawatts installed, or roughly 45% of the company’s ~1.5-gigawatt global fleet. Nearly all of it is installed at sites through Bloom’s partnership with SK ecoplant. Four of those installations are metered by Korean state power companies, and the readings are public.

One is the 8.35-megawatt Phase 6 expansion at the Bundang plant, operated by Korea South-East Power and commissioned in April 2019. The public hourly data Hunterbrook analyzed, the earliest available, begins in January 2022 and runs through June 2026.5

Bundang averaged about 95% of rated output in 2023 and has slipped every year since — to about 92% in 2025, the most recent full year, and roughly 90% in the first half of 2026. Its output shows no sustained recovery, running below Bloom’s typical 95% output benchmark in 22 of its last 24 months.

Three more plants, run by Korea Southern Power and Korea East-West Power, publish enough data to track efficiency. Yeongwol reports gas consumption, allowing Hunterbrook to calculate its efficiency directly; for Honam and Bukpyeong, Hunterbrook relied on efficiency figures calculated and published by the utilities.

• Yeongwol (15 MW, online 2021): efficiency fell from about 51% to 46% in three years; output from about 95% of nameplate capacity to 77%.

• Honam (15 MW, online 2021): efficiency fell from about 51% to 46% by late 2024; output from near 100% to 78%.

• Bukpyeong (4.2 MW, online 2022): efficiency fell from about 58% to 52%, while output slipped from above nameplate to ~93% in 2024, down to ~80% by mid-2025.

Another question mark hangs over Korea. SK ecoplant, a longtime strategic partner of Bloom, with a 500 MW purchase commitment Bloom valued at $4.5 billion in product and service revenue, was determined by Korean regulators to have overstated the 2022-2023 revenues of its U.S. fuel cell subsidiary, the unit that handles its Bloom business, allegedly to inflate its valuation ahead of a planned IPO.

Regulators initially deemed the violation intentional and recommended criminal prosecution before downgrading it to “gross negligence.” The IPO never happened: This spring, SK Group bought out its pre-IPO investors for roughly 1.05 trillion won (about $770 million) rather than take the company public by its July 2026 deadline.

As Hunterbrook reported in its first investigation into Bloom, months after Bloom’s relationship with SK ecoplant ended, Bloom began a new related-party partnership with Brookfield Asset Management ($BAM).

New York

New York’s data covers 37 Bloom installations. Among them: Home Depot stores, Queens Center Mall, Morgan Stanley’s Purchase campus, Fordham University, an IKEA in Red Hook, an Equinix data center, and a roughly 7.9-megawatt community fuel cell portfolio on Staten Island. The state meters the installations daily and posts the readings.

Straight out of the box, the 37 installations averaged 52.0%6 efficiency, about five points clear of the guarantee line. They did not stay there long. Losing an average of 2.4 percentage points a year7, every one of the 37 fell below the guarantee line at a median of 20 months, inside its second year of service. And 32 were still below it when their state-reported data ended.

Twenty-eight of the 37 decayed all the way to the replacement floor (the level at which Bloom’s contract with Fresno obliges it to repair or replace the hardware), and 13 finished below even that. Based on each installation’s measured rate of decline, the median projected time to reach that floor was under three years. Only one of the 37 was on pace to last the “over five years” that Bloom tells investors its stacks now run between replacements.

Output is no better. Only seven of the 37 units cleared 95% of rated output even in their first year; every one fell short on a cumulative average. Across the fleet, output slid from roughly 90% of nameplate in year one to about 80% by the final year of data.

One caveat: the metered New York fleet skews toward Bloom’s older ES-5-generation hardware. Twenty-six of the 37 units were installed in 2017-2018, and NYSERDA meters each unit for only about three years — so most of these records both begin and end in the ES-5 era, roughly 2017 to 2021. A newer batch installed in 2020 (Fordham, Equinix, the Red Hook IKEA, and the Annadale portfolio) runs through 2023, and one 2023 installation (Cablevision) runs through December 2025.

Bloom has a common response to numbers like these. After Hindenburg’s report drew on the same NYSERDA portal, the company filed a technical note arguing the state’s data was misleading: metering can begin 15 to 538 days after a unit switches on, missing the high-efficiency first weeks; a handful of sites carry gas boosters or backup batteries that shave a point or two; and the right yardstick, Bloom said, is cumulative efficiency, not a unit’s efficiency on any given day.

Grant the company all of it. Add back a half-percentage point for metering losses, three percentage points for ancillary equipment at the five community and resiliency sites that might have it, and even the full 538-day head start to every unit’s clock, and 30 of the 37 still fall below the guarantee line within about four years. That’s inside the five-year life Bloom promises between replacements.8

Delaware

Delaware is one of Bloom’s manufacturing homes and the site of its highest-profile early deployment: a roughly 30-megawatt fleet serving Delmarva Power under a state tariff. The project’s performance has been reported monthly to regulators since 2012. Importantly, Bloom replaced older-generation fuel cells with newer ones at this site in 2019, so any improvements in the technology available at that time would presumably be present in this data.

Hunterbrook compiled all 156 monthly observations. The initial 3-megawatt phase opened at roughly 52% efficiency in the summer of 2012. After the project reached its full 30-megawatt capacity in November 2013, efficiency fell below the guarantee line by August 2014 and through the replacement floor by November 2014, within a year of full buildout. From June 2015 through May 2019, annual weighted efficiency remained around 44%.

In 2019, Bloom repowered the project, doing away with the original 30 megawatts of Energy Servers and installing 27.5 megawatts of newer-generation equipment. Efficiency jumped straight back to about 52%. But the replacement stacks did exactly what the originals had done: declined, on a similar path, sliding back to about 47%, approximately the guarantee line, by 2023, before a partial rebound to roughly 49% by May 2025. That rebound could, of course, reflect maintenance or component replacements. Across the full record, the fleet’s monthly efficiency was below the guarantee line in 67 of its 156 months, and below the replacement floor in 52.

Output tells the same story. Measured against the fleet’s nameplate capacity in force each month (30 MW through early 2019, then 27.5 MW after the 2019 replacement), the fleet fell below Bloom’s typical 95% output guarantee in 152 of 156 months, averaging about 86%, and never once clearing 95% on a full-year average either. The 2019 replacement made no lasting difference: once the full fleet was online, it cleared the 95% guarantee just twice, both immediately after the 2019 repower, and never once in the time it was running at the full 30 MW nameplate capacity. (The only other two months above 95% came in 2012, when just 3-6 MW of the eventual fleet was installed.)

California

California is where Bloom was born, where Hindenburg found much of its 2019 evidence, and where the largest public sample of Bloom fuel cells lives. The state’s Self-Generation Incentive Program, which provided hundreds of millions of dollars in incentives to Bloom projects, requires five years of metered monthly reporting from every project it pays.

Hunterbrook analyzed 234 Bloom fuel-cell projects totaling about 92 megawatts: 14,116 project-months of data from December 2012 through October 2023 (a handful of later biogas projects extend into 2025), with the median project metered for five years — exactly the period needed to test Bloom’s five-year lifespan claim.

Almost none of that record meets the typical benchmarks. Bloom’s California project-months came in below the 95% output guarantee 97.4% of the time and below 90% in three months out of four. After excluding 20 physically impossible monthly readings above 110% capacity factor9, not one of the 234 projects averaged 95% of nameplate over its monitored life; only two cleared even 90%. The median project delivered about 84%.

The efficiency record in California largely tracks what we saw in New York.

Bloom’s projects began at a median 55.6% efficiency across their first three reported months. Median efficiency fell to 50.3% in year two, then to 49.2%, 48.5%, and 47.9% in years three through five. Of the 231 projects with usable fuel-consumption data, 105 recorded at least one month below Bloom’s 45.2% repair-or-replace threshold.

After the first year drop, the decline slows. That flattening is consistent with Bloom periodically repairing or replacing lower-performing power modules as they approach contractual thresholds, preventing the fleet average from falling much further, though the SGIP data do not identify individual replacement events.

This is the same dataset Hindenburg used in 2019, when it calculated that Bloom’s post-2016 California units were on pace to need stack replacement in under three years. That was a projection: those units had a median of 32 months on the meter at the time. The record has since added 3,450 project-months, and the answer has not changed.

America: The National Data

The U.S. Energy Information Administration collects generator characteristics annually through Form EIA-860 and publishes monthly or annual plant-level generation and fuel-consumption data through Form EIA-923, federal filings used to track power plants across the country.

The EIA does not identify the manufacturer of fuel cells in its published generator inventory. Hunterbrook identified 167 fuel-cell plants with at least one megawatt of combined fuel cell nameplate capacity and positive generation in the EIA record, cross-referencing the Department of Energy’s stationary fuel-cell inventory, EIA operator records, and court, regulatory, and SEC filings.

Using this methodology, we were able to identify 126 as Bloom Energy (as well as 37 as FuelCell Energy, and four as part of the UTC Power and Doosan PureCell lineage). Those 126 Bloom plants total about 245 megawatts across nine states, operating from 2011 through 2025, and include installations in New Jersey, Connecticut, Massachusetts, Maryland, North Carolina, and Utah that the other datasets do not capture.10

The national record tells the regional story again. When new, the fleet ran at about 51% efficiency. Within two years it fell to roughly 47%, barely over the guarantee line. As in California and Delaware, the way that steep first-year drop collapses into a slow crawl appears to be consistent with stacks being swapped as they hit the floor (though it’s hard to know for certain). Measured the way Bloom measures it (using a system’s cumulative, whole-life average), 44 of the 126 plants run below the guarantee line, and roughly 60% of the 126 never rise more than a point above it. And 110 of 111 reliably metered11 plants average below the 95% output Bloom typically guarantees.

Bloom’s showcase customers fare no better. Apple, whose Maiden, North Carolina, data center Bloom spent years promoting as a clean-energy landmark, performed worst on output: its three reliably metered sites ended at a median 42.9% efficiency and delivered a median 69% of rated output — before its flagship Maiden, North Carolina plant dropped off the federal record in 2021.

Equinix, Bloom’s marquee data-center customer before the AI era with 15 sites across the fleet, delivered a median 85% of nameplate across its nine reliably metered sites, while their median efficiency ended around Bloom’s guarantee line. AT&T, Kaiser, and Intel also fell below 95% on a customer-level median.

“Multimillion-Dollar Payment”

Hunterbrook also spoke to some of the customers who lived through the decay curve.

A part-owner of one of the larger Bloom installations in New York told Hunterbrook that their group signed a service contract after being shown an independent engineering report during the sales process. The source shared this report with Hunterbrook.

The source said Bloom’s sales team also promised that the fuel cells would perform at 95% output, with a life expectancy beyond five years.

That turned out to be wildly optimistic, according to the source. “They have never been able to get beyond that time frame ... they have failures a lot quicker than that.”

“Based on the contract, Bloom paid a multimillion-dollar payment to us,” the source said, because the fuel cells allegedly operated “below 95%.” The source did not provide evidence of this payment.

“The 95% is gone,” the source said. “Long gone.”

LSB Industries and NineDot Energy separately told Hunterbrook that they no longer work with Bloom.

What Bloom Gets Right — And What It Doesn’t

Bloom has repeatedly pointed to returning customers as evidence that its fuel cells work. In February, CEO KR Sridhar said more than two-thirds of the company’s business came from repeat customers. In April, he put the figure at 70% to 80% of its business. During the company’s earnings call on Tuesday, he described the measure more specifically, saying roughly 80% of orders came from repeat customers.

“That speaks more loudly than anything else about how happy our customers are,” he said, days after Hunterbrook had reached out to the company for comment.

“We do not obsess on the competition,” he said. “We obsess on the customer.”

But Bloom has not identified many of the customers behind those figures. And on Tuesday’s call, CFO Simon Edwards acknowledged the ambiguity, stating, “When you see the word customer in our filings, it can mean either party, the financier that buys from us and appears in our revenue and concentration disclosures or the end customer whose demand created the deal.” Its SEC filings disclose the concentration of revenue among its largest customers without naming most of them.

To the company’s credit, the public record is not all bleak — and the data shows the potential for real generational improvement. In the New York data, 2014-2018 systems averaged roughly 83% of rated output over their lives and the newest monitored project — a 2023 Cablevision installation — has run about 94% over its life, still hitting 97% to 99% at the end of its data.

One Bloom customer told Hunterbrook that Bloom “remains in compliance with our contract” and that it continues to save money. A California dairy-digester operator said their three Bloom projects have been “fairly reliable,” running “right around the contracted minimum” — though their company will not buy more, citing price, and now prefers competitor Mainspring’s linear generators.

But improvement is not the same as delivering the expected number. Even the improved units often miss the typical 95% guarantee on lifetime average; the two largest 2020-vintage projects in the New York data ran near 80%. And Delaware — the one dataset long enough to watch Bloom’s replacement hardware age — shows the newer stacks decaying on the same slope as the old.

That distinction has potential financial consequences. Every fuel cell Bloom ships is also a service liability. On Tuesday’s earnings call, Edwards attributed the company’s 22% service margin to “fleet performance, longer stack life and scale.” He added, “We believe we will sustain them there over the long term.” How Bloom accounts for these things makes the claim testable. Edwards explained on the call that service revenue “is recognized ratably net of guarantees while the service costs are booked as incurred….” Edwards also stated that “stack replacement in particular moves the margin quarter to quarter.”

In other words, every stack that wears out early lands directly on the margin line Edwards discussed.

Meanwhile, Bloom’s current accrued warranty liability rose from $20.0 million at Dec. 31, 2025, to $77.8 million at June 30, 2026, according to the company’s most recent quarterly filing, which attributed higher performance-guarantee costs to “the effects of fleet degradation.”

If stacks last more than five years, Bloom’s 10-, 15-, and 20-year service contracts can be profitable. If stacks last roughly two years in the field — as, for example, the New York median implies — then every gigawatt of AI bookings is also a gigawatt of stack replacements arriving twice as often as its stated five-year stack life implies.

That also magnifies Bloom’s scandium problem. Scandium is embedded in the fuel-cell stacks, so the faster those stacks wear out, the more scandium Bloom must source over the life of each installation.

Asked on Tuesday’s earnings call how much scandium Bloom uses and how much supply it has available, Sridhar insisted that the company could support 25 gigawatts of deployments and was not dependent on China, without addressing Hunterbrook’s reporting that Bloom has sourced the material from China despite repeatedly denying it.

Then he shut down the exchange: “Everything else is proprietary to the company. Next question.”

Our next question: Whether the product at the center of Bloom’s $50 billion valuation can actually deliver as promised.

This piece represents Hunterbrook Media’s best estimate. As always, we have laid out both what we know and how we know it. That doesn’t mean we didn’t miss something. We welcome other analyses and estimates, including from Bloom. Write to us with any math of your own at ideas@hntrbrk.com.

Author

Dhruv Patel is an investigative journalist based in Cambridge, Massachusetts, specializing in data-driven reporting. He helps spearhead investigative coverage at The Harvard Crimson, and his reporting has been cited and discussed by The New York Times, CNN, The Boston Globe, ABC News, and BBC, where he also frequently contributes commentary. A John Harvard Scholar at Harvard College, he studies computer science and economics to leverage machine learning for accountability journalism.

Editor

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor’s from Emory University. Vikas is based in Maryland.

Sam Koppelman and Till Daldrup contributed reporting.

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By: Till Daldrup, Dhruv Patel, Jean Wang, Blake Spendley, Sam Koppelman

Editor: Vikas Kumar

• Bloom Energy is one of the AI boom’s biggest winners. $BE is up about 2,000% in two years. Its valuation peaked around $100 billion. The vision: fuel cells powering AI data centers years faster than the electric grid, with Bloom saying it can scale from about a gigawatt of deployments in 2026 to 5 gigawatts annually. It’s a compelling pitch, especially in a world where power from legacy players, including turbine manufacturers, is backlogged.

• That growth story rests on a supply chain claim that Bloom’s CEO has made at least five times since February 2025, on earnings calls, to Semafor, on a podcast — and onstage with The Wall Street Journal last month. The promise: Bloom has “no China supply chain” and is “not dependent on China for scandium,” the rare earth at the core of each Bloom fuel cell. Bloom’s claim matters because Beijing now requires an export license for every shipment of scandium leaving China. If Bloom depends on Chinese scandium, China holds an off-switch on Bloom — and on the American data centers that may one day use its power.

• The problem: Bloom is, in fact, reliant on C5 Chinese scandium, according to global trade data, Chinese corporate filings, satellite imagery, and Hunterbrook’s messages with Bloom’s suppliers in China. Hunterbrook traced four separate China-linked routes into Bloom’s supply chain — scandium oxide shipped directly to its Delaware plant, plus scandium-bearing ceramics and powders flowing through intermediaries in Thailand, Japan, and South Korea. A sales representative of Hunan Oriental Scandium — which claims over 50% of the global market for fuel-cell-grade scandium oxide — told Hunterbrook: “We are also BE’s largest supplier of scandium.” Asked how the material reaches U.S. customers under Beijing’s controls: “Not exported directly.” Hunan Oriental was featured at Bloom’s May supplier conference as one of three Chinese scandium-linked suppliers. One received Bloom’s “Impact Supplier Award.”

• Show Me the Scandium: Even with supply from China, the scandium math fails. Hunterbrook’s supply-demand model — built from government filings, Bloom’s patents, industry data, and peer-reviewed studies — shows Bloom alone needs roughly 220 tons of scandium oxide to meet Wall Street’s 5 GW expectations. But that’s against total projected global supply of only about 240 tons versus total global demand of about 310 tons, including supply locked up by customers like Lockheed Martin (for the F-35 fighter jet). Bloom already claims to be the largest scandium consumer in the world. On the numbers, the production ramp underpinning Bloom’s valuation appears physically and commercially unattainable — with essentially all Wall Street models of Bloom’s production implying a scandium shortage by 2028 based on Hunterbrook’s model.

• The demand side of the story is also not what it appears. In 4Q25, 74% of Bloom’s revenue — $574 million of $778 million — came from joint ventures Bloom part-owns with Brookfield. Bloom’s own footnotes concede these customers “may be a project-finance affiliate rather than the ultimate end user.” What Bloom’s recent revenue growth shows is that Brookfield will finance Bloom’s production, not that a meaningful customer base has adopted Bloom’s fuel cells. And it appears Bloom has been recognizing revenue well before its fuel cells have actually been deployed.

• The Brookfield partnership’s initial promise, a European AI factory site to be named “before the end of the year,” does not seem to have been fulfilled. The designated anchor tenant for its unbuilt AI project is Radiant, Brookfield’s own captive cloud company, which has no publicly named CEO or disclosed customers. The Brookfield fund backing Radiant is anchored in part by Nvidia, whose chips the factories will house. Even by the standards of AI roundtripping — which can be positive sum — the deal looks especially circular.

• Bloom markets an unaudited $20 billion “backlog” of orders. Its remaining performance obligations (RPO) — the analog to backlog that its auditor reviews — total $492.6 million as of March 31. That’s roughly 2.5% of the backlog. Among 10 peers Hunterbrook analyzed, including GE Vernova, Oracle, Microsoft, and CoreWeave, the widest comparable gap between backlog and RPO was about 2x. Bloom’s is over 40x, in part because it includes ongoing servicing revenue customers are not obligated to pay and tax credits the government has not agreed to grant.

• The two flagship projects presumably driving that backlog are both facing serious challenges to their viability. Oracle’s Project Jupiter in New Mexico has no approved air permit for fuel cells and no gas pipeline to feed the fuel cells, leading research firm SemiAnalysis to push back its base case for first power from 2027 to 2029. Hunterbrook interviews with New Mexico officials and an environmental group suing to stop the Oracle project indicate it could be delayed into the 2030s, or even canceled outright like Blackstone’s data center in Virginia last week. Meanwhile, AEP’s $2.65 billion fuel cell order also appears to have slipped, with the utility updating its investor deck from a target deployment by the end of 2028 to one “no later than 2030.” That deal, which represents a meaningful share of Bloom’s backlog — related to a campus that reportedly lost its developer Crusoe in June — is backstopped by an unnamed hyperscaler that can walk away by covering AEP’s costs incurred, plus roughly 10%. Both new Oracle and AEP delays followed Bloom raising guidance in its last earnings call.

• Put together: Either the 5 GW ramp is real — and the scandium math breaks it, plus Beijing holds the off-switch — or it is not, and the record quarters are largely circular financing.

• Bloom can’t easily engineer its way out. Its own patents identify too little scandium in the electrolyte as a cause of accelerated fuel-cell aging. Cutting scandium seems to reduce the stack life on which Bloom’s 10-to-15-year service contracts depend. Nor can ex-China supply fill the gap: “Right now in the Western world, there’s basically no scandium processing capability to speak of, or just very, very little,” John Mavrogenes, a professor of economic geology at the Australian National University, told Hunterbrook. “It would be a long road to say we’re gonna get serious about scandia.”

• Bloom has repeated this pattern for years: When end demand doesn’t materialize, it finds an intermediary willing to bet on Bloom — then books that bet as growth. Delaware ratepayers were legally obligated to buy Bloom’s power for two decades, at costs that eventually ran over five times what the public was originally told, for jobs that came up 600 short of Bloom’s projections. SK ecoplant committed to volumes that propped up two years of results, then quietly got three extra years to comply when Korean demand stalled. The month after SK ecoplant began selling its Bloom stake, Bloom formed its joint ventures with Brookfield, which is now the counterparty buying Bloom’s boxes. Each time, the financier’s commitment — not a customer’s consumption — makes the numbers.

• The people in charge of reporting those numbers keep changing. Bloom has had four finance chiefs since the start of 2024, including nearly a year with no permanent CFO, which happened to be the same year the Brookfield structure was built. The CEO, meanwhile, has never changed.

• Neither Bloom nor its CEO replied to Hunterbrook’s repeated requests for comment, which laid out our findings in detail. Oracle replied to initial outreach, then did not respond when asked if it knew Bloom sources from China. Brookfield did not respond to repeated outreach from Hunterbrook. AEP directed Hunterbrook to links of statements it had already made.

• While Bloom did not respond to our requests, it certainly seems like someone at the company read our questions. The day before publication, Bloom published a blog post about scandium, written by its COO. The post confirmed several of Hunterbrook’s findings, including that scandium oxide plays “an important role” in the functioning of its fuel cells, and that Bloom believes itself to be the world’s biggest consumer of the rare earth. Bloom also included vague responses to some of our other findings. Rather than echo Sridhar’s unequivocal statements about China, the blog post asserts that no “single country” can determine Bloom’s “destiny.” It explains that Bloom sources scandium from the by-products of other mining operations — as Hunterbrook’s reporting already noted — giving titanium as an example. Bloom emphasized that more than half of titanium mining (though not necessarily half of scandium production) occurs “outside of China.” The post further claims Bloom believes its supply chain “can support up to 25 GW per year,” but did not share any details on the calculations or assumptions that lead the company to that belief; nor did Bloom specify the timeline of when that supply would become available. Per our calculations, which are based on the scandium levels listed in Bloom’s own patents, 25 GW of power would require roughly 620 tons of scandium a year: about ten times what the entire world consumed in 2025, per USGS figures. Bloom cautions readers: “This article was published on July 7, 2026, and is for informational and educational purposes only. Readers are encouraged to read Bloom’s full disclosures, including information on potential risks and uncertainties that may impact Bloom’s business, set forth in its periodic reports filed with the SEC.” As far as we can tell, no other post on the company’s blog includes this disclaimer. As of press time, Bloom has not issued a press release or 8-K denying any of the facts presented in this article.

“We are not dependent on China for scandium,” Bloom Energy ($BE) CEO KR Sridhar pledged in an April 2025 earnings call. “I can state that very clearly.”

“We do import materials and components from abroad, but not from China,” he said.

Analysts pressed him three times on Bloom’s supply chain. He left no room for ambiguity.

“What you need to understand is none of our critical materials come from contested supply chains or war zones, and there is no China supply chain for us.”

Sridhar made the same guarantee in Bloom’s February 2025 call: “We are not dependent on China for our supply chain, and that is super important.”

That April, China added scandium to a list of materials requiring national security export licenses. That means the material can only leave China with Beijing’s discretion on a case-by-case basis.

Among many exotic uses, scandium is essential to America’s F-35 fighter jets, making access to the metal a national security issue for both the U.S. and China.

But the biggest buyer of scandium isn’t any government. It’s Bloom, which, according to Sridhar, has become the single largest consumer of the metal in the world, because scandium is a critical component of its fuel cells.

Specifically, scandium is the key material in the electrolyte of Bloom’s fuel cells (“Bloom Boxes”). It allows electricity to be produced and lengthens the fuel cell’s lifespan. There is no known commercially viable substitute for scandium in Bloom’s fuel cell design that wouldn’t degrade quality, according to the company’s patents and fuel cell experts that Hunterbrook interviewed.

The problem: China produces most of the world’s scandium, by one estimate as much as 90%.

That is why the company has been asked, repeatedly, about how it procures the metal. And it is likely why Bloom has been so insistent that it is not reliant on China.

In a September 2025 interview with Semafor, Sridhar went as far as to say that Bloom had decided more than 20 years ago that it would not rely on Chinese suppliers. “Starting in 2004, we said we are not going to depend on a Chinese supply chain. If we believe in energy abundance for all, there cannot be a single source to strangle you,” he said.

Then he told an energy podcast: “We never coupled ourselves to the China supply chain, which in hindsight means today we don’t have to decouple from something.” Sridhar specifically said this was a big part of Bloom’s edge over gas turbine producers, whose supply chains he described as rooted “in the same place.”

Last month, Sridhar stated yet again that Bloom is not sourcing from China in a June 10 interview onstage with The Wall Street Journal.

”Very early on in the company we made a decision that we are only going to depend on supply chains that we can completely trust and that was a country we avoided,” he said, responding to a WSJ question on China. He gave 2005 as the year the company made this decision. Then he teased a possible deal with the U.S. Department of Defense based on Bloom’s independence from Chinese supply.

But Bloom does rely on Chinese scandium — and it did at the time of each of these claims, according to Hunterbrook’s analysis based on trade data, satellite images, and conversations with major suppliers and experts.

In total, we found four separate trade routes that appear to show Chinese scandium is still part of Bloom’s supply chain, and the material is reaching the U.S. through intermediary countries.

As recently as May 2026, Bloom even featured three Chinese scandium suppliers — one of them with the word “scandium” in its name — on a logo wall at its supplier conference.

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After the April 2025 earnings call, Bloom made a subtle update to its quarterly filing for 3Q25, adding that China supplies “multiple components including 70% of rare earth metals used in electronic and electromechanical components that are part of our tier 2 and tier 3 sub-assembly suppliers.” Its 10-K report, filed in February, then used substantially similar language on pages 47 and 56, but dropped the 70% figure, and added language stating that “continued escalation of trade tensions between China and the U.S. could impact our ability to source these rare earth metals and components.”

Yet the company maintained in both filings: “Our supply chain is not dependent on China.”

And months after the annual filing, Sridhar went onstage with The Wall Street Journal in June 2026 — where he reiterated, unambiguously, that the company does not source from China.

“I don’t know of anywhere else they would get it from that’s of the scale that they would need,” Eric Wachsman, director of the Maryland Energy Innovation Institute, told Hunterbrook about Bloom’s scandium needs. “You have to be able to purify it, and that purification process tends to be primarily in China.”

One way Bloom appears to be obfuscating its reliance on China is by rerouting shipments through intermediary countries. This may look better in the trade data, and provide some support for Sridhar’s claim that Bloom sources from “multiple countries” across “multiple continents,” but it doesn’t change the fact that a large chunk of the scandium is still from China: a single point of failure supply chain risk.

And China can cut off that scandium supply regardless of how indirectly it flows to Bloom.

In fact, multiple Chinese scandium suppliers told Hunterbrook that China’s Ministry of Commerce requires end users of scandium — not just exporters — to provide information to the government regarding its planned use for the material. If the Chinese Communist Party does not approve, it can block the exports.

Bloom’s reliance on this supply chain means China may have an off-switch on America’s data center build-out — at least, data centers dependent on Bloom.

After about two decades of losses since its 2001 founding, Bloom recently became a darling of the AI stock boom because fuel cells might provide data centers with behind-the-meter power. Fuel cell financials had been uneconomical, but new grid connections are now taking years, so data centers are willing to pay the premium for quicker time to power. The numbers work even better with the cells now consuming cheap methane instead of more expensive green hydrogen. (Whether Bloom’s original approach was green in the first place is an open question that led to an EPA fine against Bloom and featured in Hindenburg Research’s investigation.)

Bloom’s keystone data center deal is an agreement with Oracle ($ORCL) to provide up to 2.8 GW of power for data centers. According to Hunterbrook’s model, there may not be enough scandium on the entire global market to meet the production required for that deal, let alone the rest of Bloom’s backlog — which includes a deal with the Nebius Group ($NBIS), a neocloud backed by Nvidia ($NVDA).

$BE stock nearly quadrupled in 2025 after the news broke of the Oracle partnership — and more than doubled again in the first half of 2026. In total, its share price is up more than 2,000% within two years, with Bloom’s market cap peaking around $100 billion in June, rivaling energy giants like Constellation ($CEG) and Vistra ($VST), on the thesis Bloom can rapidly scale up.

$BE also appeared to be a big winner for Leopold Aschenbrenner’s fund Situational Awareness, though the fund sold over a third of its disclosed $BE position in its most recently reported quarter, even as its assets under management soared.

But can Bloom actually deliver enough fuel cells?

The answer to that question may explain the reason for the company’s repeated insistence on its independence from China.

On its scandium sources, Bloom has told investors: “We don’t reveal those sources and methods. That’s part of our IP.”

But Hunterbrook reconstructed the global scandium supply chain — identifying the few active projects and evaluating potential future sources. The newsroom also reviewed patents, market data, and academic and industry research to estimate Bloom’s consumption.

The conclusion was clear: Bloom lacks enough scandium for its lofty ambitions and timeline.

The model’s math aims to be conservative. Rather than counting only current production, it gives partial credit to meaningful planned production, including generous assumptions about the likelihood and speed with which pre-commercial projects can ramp up. It also assumes the existing growth rate of scandium consumption by other customers will hold steady, despite wider adoption across aerospace, military, and automotive industries. The model also considers the case in which Bloom has engaged in significant “thrifting” (essentially recycling scandium from used fuel cells) and innovating to consume less scandium, though it does not assume needle-moving stockpiling for reasons described below.

Bloom did not respond to repeated requests for comment about its scandium supply. Instead, the day before publication, its COO posted a blog asserting Bloom’s supply chain “can support up to 25 GW per year,” without providing evidence. Bloom said it “maintains strict confidentiality around its sourcing network” — supplier relationships and sourcing volumes are “proprietary” — “to protect the resilience of our supply chain.”

Bloom then cautions readers to read its “full disclosures, including information on potential risks and uncertainties that may impact Bloom’s business, set forth in its periodic reports filed with the SEC.”

Hunterbrook’s data demonstrates that without Chinese scandium, even if every new non-Chinese project meets current timelines, adjusted for the risk it slips, in 2030 there would only be about 60 tons of scandium oxide that’s not already contracted by other customers like Lockheed Martin.

Bloom needs about 220 tons to power 5 GW and fulfill unit replacements. Even with Chinese supply, the data indicates there will not be enough available scandium to meet Wall Street’s expectations for Bloom.

If Bloom can’t deliver enough fuel cells, it wouldn’t be the first time the company’s claims didn’t match reality. In the 16 years since Sridhar debuted Bloom to a national audience on 60 Minutes, its statements about cost, hazardous waste, ratepayer fees, and fuel cell life have been contradicted by the record, including state filings, federal enforcement findings, and Bloom’s own SEC disclosures.

Each time, the better number came first and the correction came later, in a clawback, a penalty, or a restatement.

This time, it’s not just the scandium supply numbers that don’t add up. It’s also the demand for Bloom’s products.

Bloom’s recent string of record-setting quarters rests on fuel cells sold to financing vehicles the company itself part-owns with the financier Brookfield, but the orders don’t appear to be turning into operating data centers.

And since Bloom’s last guidance update, two flagship destinations have recently slipped by years.

Project Jupiter in New Mexico has no approved air permit and a gas pipeline stuck at FERC. In May, the industry publication SemiAnalysis estimated first power at the site in 2029. Meanwhile, Bloom’s fuel cell deal with the utility AEP — apparently tied to a hyperscaler plant outside Cheyenne, Wyoming — slid from “no later than year-end 2028” to “no later than 2030,” according to AEP investor slide decks.

The roughly $20 billion backlog Bloom markets to investors is more than 40 times the $492.6 million in binding contractual obligations disclosed in its most recent quarterly filing. Across peers Hunterbrook analyzed, from turbine makers to hyperscalers, the widest comparable gap was about two times. This, at a company that has run through four finance chiefs since the start of 2024 — and five since 2020.

The scandium shortage and the demand gap converge on a single debate: whether the 5 GW ramp key to Bloom’s valuation is real, or whether it’s just the latest Bloom story that turns out to be too good to be true.

INSIDE THE CHINA SUPPLY CHAIN BLOOM SAID IT DIDN’T HAVE

Hunan Oriental Scandium is a major scandium producer in China. When a Hunterbrook reporter reached out about shipments to the U.S., a representative listed the company’s credentials.

“Our global market share for 4N scandium oxide generally exceeds 50%,” they wrote, adding: “We are also BE’s largest supplier of scandium.” BE is the ticker symbol for Bloom Energy.

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A bold claim by the Chinese supplier, as Bloom’s CEO said his company has no China supply chain.

But trade data and company announcements corroborate longstanding ties between Bloom and Hunan Oriental, which is a subsidiary of LB Group, a large Chinese chemicals company.

Hunan Oriental shipped scandium oxide directly to Bloom in Newark, Delaware, at least four times between August 2023 and May 2024, according to commercially available trade data. The product descriptions include “scandium oxide” and “scandium oxide drum pits.”

Bloom also visited the same supplier a few months after the first of these shipments.

On November 2 and 3 in 2023, a Bloom delegation from the U.S. visited Henan Rongjia Scandium-Vanadium, a “wholly-owned subsidiary of Hunan Oriental Scandium,” for an “inspection and exchange,” according to a Chinese-language company account. The Bloom delegation included a product manager, chief engineer, senior staff engineer, supply-chain procurement manager, and quality manager.

The delegation toured LB Group’s “exhibition hall, corporate technology center, and Rongjia’s scandium oxide production workshop,” the company said in a press release.

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A photo taken at Bloom’s 2026 supplier conference in May and posted to LinkedIn appears to confirm the relationship between the two companies has continued: It shows Hunan Oriental Scandium’s logo.

But while Hunan Oriental claims to be one of Bloom’s top suppliers, no further shipments to the fuel cell manufacturer appeared in that trade data, after the scandium deliveries in 2023 and 2024.

So how does the material reach Bloom now, especially given the tighter Chinese export controls on rare earths that took effect in 2025?

When the Hunterbrook reporter asked the Hunan Oriental sales rep how the company is sending its scandium to U.S. customers, the response was blunt.

“Not exported directly,” they wrote.

THE PLAYBOOK — AND THE MONEY RUNNING IT

A Chinese securities filing gives insight into Bloom’s supply chain playbook and how one of its partners has apparently obfuscated Bloom’s reliance on Chinese products.

Zhejiang Chunhui Intelligent Control, a Chinese manufacturer, has supplied Bloom with the temperature sensors that monitor its fuel cell stacks since 2007. In a November 2025 disclosure to the Shenzhen Stock Exchange, reviewed and translated from Chinese by Hunterbrook, Chunhui describes itself as Bloom’s dominant sensor supplier, accounting for more than 70% of the American company’s purchases of the part over a roughly two-decade relationship.

The sensors are not scandium. But the filing lays out, in Chunhui’s own words, how Bloom is trying to limit its exposure to Chinese trade. Bloom “has begun changing its supply-chain process” — directing Chunhui to ship its products not to the United States, but to Bloom’s “other overseas suppliers,” who “complete assembly before shipping on to the United States,” in order to “gradually reduce direct exports to the U.S. and thereby mitigate the impact of U.S. tariff policies.”

The Chinese filing even names Bloom’s waypoints.

Starting in 2025, Chunhui began routing its Bloom-bound product through Kaori Heat Treatment in Taiwan and MTAR Technologies in India. Both are Bloom suppliers. The trade data matches: Chunhui’s direct deliveries to the U.S. fall during this period and become sporadic, while the weight of shipments from Kaori and MTAR to Bloom increases significantly.

Chunhui’s direct sales to Bloom dropped from roughly 31% of its revenue to under 13% as the rerouting took hold.

Bloom’s recent 10-K disclosure appears to confirm that the company is using the same playbook with rare earth metals and compounds from China by routing them to the company’s “tier 2 and tier 3 sub-assembly suppliers.”

Hunterbrook looked at Bloom’s shipments over the past two years to uncover the waypoints through which Bloom receives Chinese scandium. We identified three trade routes that appear to obscure the Chinese origin of Bloom’s scandium imports.

ROUTE 1: A MAJOR CHINESE SUPPLIER’S THAI SUBSIDIARY

According to the import data we reviewed, Glory Winner (Thailand) Co. Ltd. shipped more than 154 metric tons of ceramic electrolyte membranes to from Thailand to Bloom between July 2024 and November 2025. Glory Winner is a subsidiary of China’s Three Circle Group, which has been identified as a “core supplier” for Bloom in Chinese media.

Scandium is a key component of the ceramic electrolyte membranes in Bloom’s fuel cells, per the company’s own patents and multiple fuel cell experts interviewed by Hunterbrook.

The United States Geological Survey (USGS) does not list Thailand as a scandium producer.

So while Bloom’s scandium-containing parts sourced from Glory Winner may not be shipped directly from China, trade data and Chinese industry coverage indicate that they are in fact of Chinese origin.

A diagram in Three Circle’s 2026 draft IPO prospectus for the Hong Kong Stock Exchange shows that the company’s China-based operation is supplying “raw materials and equipment” to Glory Winner. Elsewhere in the document, Three Circle says “the main raw materials are all sourced domestically,” referring to China.

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Three Circle’s 2021 response to a Shenzhen Stock Exchange inquiry letter suggests that this trade route was set up in 2019 and designed to avoid U.S. tariffs.

“To mitigate the impact of the additional tariffs on fuel cell separator plates, the company consulted with relevant customers and implemented the following measures,” the document states. “In July 2019, it established a new subsidiary, Glory Winner (Thailand) Co., Ltd., and relocated the fuel cell separator plates business to Thailand, assigning production and sales responsibilities to the new subsidiary.”

But Three Circle did not always use the Thai route.

Trade data shows a related entity, Hong Kong Threecircle Electronic, shipping “ceramic substrate for fuel cell application” directly to Bloom under its own name between 2024 and 2025.

Glory Winner hasn’t shipped to Bloom since November 2025 according to the trade data, over six months after the Bloom CEO’s repeated denial of reliance on Chinese scandium during the earnings call. But Three Circle told investors as recently as December that it “has established a long-term cooperative relationship with Bloom Energy and is its main supplier of fuel cell membrane sheets,” according to Chinese media.

The company, which happens to be listing in Hong Kong this week, did not name Bloom directly in its IPO prospectus. Instead it said its largest customer in 2023, 2024, and 2025 is a “public company listed in the U.S. that mainly engages in development and production of reliable new energy products.” It also disclosed: “SOFC electrolyte sheets have been supplied to a leading North American fuel cell company.”

Similarly to Hunan Oriental Scandium’s logo, Three Circle’s logo appeared on a logo wall at Bloom’s May 2026 supplier conference, indicating the two companies are still doing business together.

‍But while the apparent rerouting through Three Circle’s Thailand subsidiary might help evade U.S. tariffs, it likely will do nothing to mitigate Beijing’s export control choke point, as Hunterbrook’s conversation with Hunan Oriental indicated.

When Hunterbrook asked Hunan Oriental about procuring via an intermediary in a third country, the company’s representative walked through the rigorous disclosure requirement that included explicit disclosures from the end user, including financial information, as well as business scope and main products produced. The ultimate end user had to directly provide the information to the exporter before the product could be shipped.

“Whether the declaration is approved depends on the Ministry of Commerce’s review of the buyer and the intended use of the products,” the rep said, adding the process typically takes 45 days.

The requirements also include a commercial inspection, the rep said.

“No step can be skipped.”

It’s a rigorous process. So rigorous that Hunan Oriental’s second representative had questions about the end user for the sale it was discussing, asking Hunterbrook’s journalist: “Isn’t this company an investigative financial media outlet based in New York, USA?”

ROUTE 2: A JAPANESE SUPPLIER’S CHINESE TRADING ARM

Bloom also receives “scandia-stabilized zirconia powder” from Daiichi Kigenso Kagaku Kogyo (DKK) in Japan, according to import records reviewed by Hunterbrook. The powder is the raw version of the critical material the fuel cell manufacturer needs for its electrolytes. Since September 2024, Bloom has received almost 300 drums of “scandia” or “scandia-stabilized” powder, though not all was labeled as zirconia powder. While they were shipped from Japan, a look at DKK’s corporate structure suggests the powder’s actual provenance is China.

The Japanese materials manufacturer’s corporate network includes two Chinese “associated companies” and one Chinese subsidiary, DKK (Shanghai) Materials Trading, which specializes in zirconium compounds.

Its website features scandium prominently. The product page links to DKK’s Japanese website of zirconia for solid oxide fuel cells, the type of scandia-stabilized zirconia powder Bloom bought from DKK, suggesting the Japanese company sources from its Chinese subsidiary.

A possible non-Chinese source of scandium for a Japanese supplier is Sumitomo Metal Mining, which recovers scandium as a byproduct at its nickel operation in the Philippines and refines it into scandium oxide in Japan. Sumitomo Metal Mining said in 2016 that it had signed a long-term scandium supply deal with an unnamed “major U.S.-based fuel cell manufacturer,” widely believed to be Bloom.

But that operation has remained small. Philippine government data from the Mines and Geosciences Bureau’s Caraga office shows scandium oxalate output from the region that hosts Sumitomo’s Taganito operation hasn’t meaningfully exceeded 8 tons in a year in scandium-oxide equivalent (there’s about 1 ton of usable scandium oxide from each 3 tons of scandium oxalate). Sumitomo said in May that it planned to increase scandium production capacity, and Japanese press reported the increase at about 20%. That’s a fraction of what Bloom needs. The USGS does not list Japan among countries where scandium resources have been identified.

That leaves DKK’s Chinese subsidiary as a more probable origin of the powder shipped from Japan.

In recent financial filings, DKK does not mention scandium specifically, but the company flags that for “medium-to-heavy rare earths, production is heavily concentrated in China, and the impact of export restrictions persists.”

A 2026 DKK-commissioned analyst report expressly flags that the company uses scandium oxide in “zirconia for fuel cells” and that the material is subject to Chinese export controls, suggesting once again that the company is sourcing it from China.

ROUTE 3: THROUGH BLOOM’S PARTNERS IN SOUTH KOREA

In 2024, Korean media reported a local success story. The company KV Materials had effectively localized the production of “electrolyte raw materials and powder” in Korea and would supply these products to Amosense, “a company specializing in materials and components,” to be turned into electrolyte substrates.

Subsequent industry coverage confirmed which trade partner Amosense was producing these components for: “Amosense will accelerate earnings growth by gradually expanding supply volumes following the shipment of the initial batch of solid oxide fuel cell (SOFC) ceramic substrates for Bloom Energy, which was prepared in the first week of March,” Daily Invest reported.

The shipments seem to be ultimately headed to the U.S. to be used for Bloom’s data center push, according to Korean news reports: “As Bloom Energy’s orders expand due to the surge in demand for AI data centers, Amosense’s ceramic substrate production capacity is also expected to expand more than threefold to approximately 50 billion won by the third quarter of this year,” Pinpoint News wrote.

Bloom’s ceramic electrolyte substrates contain scandium, according to its patents. But the USGS doesn’t list South Korea as a nation in which scandium resources have been identified, meaning the scandium baked into the Korean ceramic electrolyte substrates Bloom bought had to come from somewhere else.

The most likely place seems to be China. KV Materials, which provides the “electrolyte raw materials,” is actually owned by Vital Thin Film Materials, a Chinese scandium-products maker and part of Vital Group, corporate records show.

In January 2024, a Korean newspaper reported that Vital Group had shifted part of its fuel-cell business into the subsidiary with 20 billion won invested into the production. KV’s CEO pledged to make the company “a core hub of Vital Group.”

According to filings in Korea’s corporate disclosure database, KV Materials spent 127 billion won ($83 million) purchasing from its parent company, Vital’s Hong Kong subsidiary, in 2025.

If the scandium powder feeding Bloom traces back to a Chinese parent, then Bloom’s Korean operation would not take China out of the supply chain. It would transform the scandium and obscure its ultimate origin, turning Chinese-sourced scandium into a Korean electrolyte substrate before it reaches the United States.

Vital itself appears to be one of Bloom’s key suppliers. Its logo showed up on the same wall at Bloom’s May 2026 supplier conference as Hunan Oriental Scandium’s and Three Circle’s logos.

Bloom even seemed to have bestowed a special honor on the company: Vital apparently received the “Impact Supplier Award 2025.” The award is given to a supply partner who “significantly advanced our operational success, strengthened resilience and enabled scalable growth across the value chain,” according to a video Bloom posted on its LinkedIn page.

Vital’s North American subsidiary, Vital & FHR North America, has been a known Bloom supplier since 2023 — but the Chinese company’s apparent involvement in Korean electrolyte substrate production for Bloom has not been reported before.

THE TIES THAT BIND

Bloom’s scandium supply chain seemingly has at least four separate links to China: via Hunan Oriental, Japan, Korea, and Thailand.

And Chinese records show Bloom’s relationship with Chinese scandium suppliers goes back more than a decade, despite the CEO’s claims that Bloom has avoided the country since as early as 2005 and never had to “decouple” from China.

In May 2009, Bloom personnel visited China and Bloom signed a cooperation-intent contract with Hunan Rare Earth Technology Development Co. to jointly invest in a rare earth materials production line for Bloom’s fuel-cell division.

According to an April 2010 Chinese media report, Liu Jiaxiang, the director of the Hunan Rare Earth Metal Materials Research Institute, said that Bloom used the institute’s scandium for its fuel cell modules. “For the previous one or two decades, Bloom’s research had not been successful, but the positive electrode made with high-purity scandium oxide reduced the reaction temperature of the fuel cell by more than 200 degrees Celsius,” the article says.

In 2012, a Chinese recruitment notice described Taojiang Ruilong Metal New Materials Co., Ltd. as a joint venture between Hunan Rare Earth Metal Materials Research Institute and Bloom. The company’s business included crude scandium enrichment, high-purity scandium oxide production, and key fuel-cell materials.

And a 2013 Chinese industry-news article said a state research team led by the Beijing General Research Institute for Nonferrous Metals built a 20-ton-per-year high-purity scandium oxide line in cooperation with Bloom Energy.

Bloom acknowledged that its products rely “on a rare earth mineral” from suppliers “primarily located in Asia” several times in SEC filings between 2016 (pre-IPO draft registration statement) and 2019, before removing the mention altogether. The company also repeatedly flagged that it was sourcing from China before 2023 and then apparently dropped Chinese supply chain disclosures from its reports — before they reappeared in its quarterly filing for the third quarter of 2025.

At one point, Bloom appears to have tried to reduce its reliance on Chinese scandium by starting its own U.S. scandium extraction operation. According to an SEC filing ahead of its 2018 IPO, the company disclosed that “a subsidiary of the Company operated a scandium mining operation in the state of Montana pursuant to a lease.” That lease was terminated in April 2016. “The operation did not involve any actual mining, but rather entailed a physical treatment to upgrade the scandium concentration in tailings left on the mine’s surface from past mining operations not related to the Company,” Bloom states in the SEC filing.

‍Corporate records seem to indicate that this subsidiary was Rye Creek LLC, which reprocessed tailings from the Crystal Mountain in Darby, Montana. The company is still active, according to Montana’s corporate registry. It’s unclear why the Montana mining operation shut down, but this apparent attempt to build a domestic supply chain did not come to fruition.

It’s not just scandium-containing components that Bloom is sourcing from China: A Chinese sell-side analyst report from June also lists various other Chinese companies as Bloom suppliers, for goods ranging from electrolyte separator sheets to interconnects, magnetic components and temperature sensors. Trade data indicates that Bloom received shipments from a Chinese company as recently as Monday.

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This is not necessarily surprising. Almost every hardware company has China in its supply chain. But it’s strange considering one of Bloom’s key selling points — one its CEO highlighted in an interview with the Wall Street Journal last month — is that it does not rely on China.

SHOW ME THE SCANDIUM

The math explains why Bloom can’t escape China.

Between its founding in 2001 and 2024, Bloom had deployed a total of approximately 1.4 GW of fuel cells. By 2030, Wall Street is modeling the company scaling to production of up to 5 GW per year, driven by the AI boom.

That’s a big scale up.

How big?

Hunterbrook ran an extensive calculation of scandium supply and demand each year from 2025 through 2030. The deep dive included assessing every identifiable source of potential scandium production and consumption we could find worldwide. All calculation inputs directly cite government filings, Bloom patents, peer-reviewed academic literature, satellite imagery, company statements, and other independent sources.

The takeaway: Reliance on China isn’t even Bloom’s biggest problem. There won’t be enough scandium in the world — let alone outside of China — to meet Bloom’s needs across several years.

Here’s the math.

DEMAND

Bloom won’t say how much scandium it needs for its fuel cells. The public record is full of misinformation.

The Wikipedia page on the Bloom Box, for instance, claims the company requires just “130kg–150kg of scandium per GW,” a figure orders of magnitude lower than the public estimates reviewed by Hunterbrook. The number was added earlier this year by an anonymous editor with no source, and the page’s only scandium citation was flagged as an AI-generated reference.

Even employees have been kept in the dark, a former senior engineering manager told Hunterbrook. “They were very, very quiet about what they did, what they created, what they added,” they said about scandium. “There wasn’t really any understanding of what that was, where they were getting it from, what they needed to secure.”

So Hunterbrook built the number, measured in metric tons, from scratch, using two independent methods that converge.

METHOD 1: COUNT THE ATOMS

Bloom’s electrolyte is a ceramic material made from scandia-stabilized zirconia. In a solid oxide fuel cell, the electrolyte separates the anode and cathode and conducts oxygen ions; at the anode, those ions react with natural-gas-derived fuel in an electrochemical process that produces electricity without combustion.

The high operating temperatures of fuel cells mean that plain zirconium oxide won’t hold the right crystal structure as it cools: It cracks and loses conductivity. So you “stabilize” zirconia by mixing in another oxide. Bloom chose scandium oxide, which has superior properties to alternatives like yttria.

Bloom’s patents describe that mix at around 10 mol%.1 That means that out of every 100 oxide molecules in the ceramic, 10 are scandia and 90 are zirconia. Because a scandia molecule is a bit heavier than a zirconia molecule, 10 mol% works out to roughly 11% of the electrolyte by weight.

That’s the recipe. The next question is how much ceramic electrolyte each cell actually contains.

A 2021 Bloom technical deck put the company’s electrolyte at a 100-micron thickness, producing 25 watts per cell. Bloom repeated the same watt figure in a 2022 deck. Hunterbrook modeled each cell at roughly 100 square centimeters of active electrolyte area, nearly identical to the 99-square-centimeter active-area input in a Department of Energy stack-cost model which uses Bloom as a benchmark.

Run the geometry through the density of the ceramic, and each finished 100-kW stack has roughly 2.5 kilograms of scandium oxide baked inside it.

That’s roughly 25 tons per GW actually sealed into sellable products.2

But a factory has to buy more powder than ends up being used in finished cells.

A Bloom-authored white paper says each step from stack to column to power module has a “yield loss,” meaning some parts, which could contain scandium, don’t pass to the next build stage. Models tied to the U.S. Department of Energy put numbers around that: A mature-process case gets to roughly 85% yield3 and a downside case gets to roughly 65%.4 Hunterbrook modeled an 85% yield in the best case and 65% yield in the downside case, then used the midpoint for the central estimate.

At that rate, the scandium Bloom actually has to purchase climbs to roughly 3.0 to 3.9 kilograms per 100 kW, depending on the scenario.

That assumes Bloom has been honest about its stack life, which has been questioned in the past. And between its 2024 and 2025 Impact Reports, Bloom made its language regarding the life of its fuel cells much more conservative. In 2024, the company said: “We predict 2024 fleet medium time to refurbishment as 5 years.” In 2025, the company deleted that language, saying only: “As our fuel cells age, efficiency decreases, and replacements are made.”

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Bloom statements about product efficiency in its 2024 and 2025 Impact Reports (highlight added by Hunterbrook). Source: Bloom Energy

That’s one approach to modeling Bloom’s scandium need. Here’s a second.

METHOD 2: FOLLOW THE MARKET

We checked our bottom-up model answer against the market, from the top down.

That starts with the question: How much of the world’s scandium supply is consumed by solid-oxide fuel cells (SOFCs)?

Two industry reports put SOFCs at roughly two-thirds or more of total scandium oxide consumption.

Sunrise Energy Metals, in a 2026 feasibility study, estimated global demand for high-purity scandium oxide at 50 to 60 metric tons per year, with about 40 tons going into SOFC production. A 2025 Asian Metal interview with the general manager of Hunan Oriental Scandium reached almost the same fraction from the other direction: roughly 20 tons of SOFC demand out of about 30 tons of global scandium oxide use.

That does not all belong to Bloom, though the company holds by far the largest share in the industry. A February 2026 Soochow Securities report put Bloom’s SOFC market share at about 75%. That marks a small increase from Fortune Business Insights’ roughly 55% to 65% estimate for 2025 and a separate 2023 estimate of around 60%.

Hunterbrook used the more recent estimates: SOFCs at roughly two-thirds of the 60-ton global scandium demand, and Bloom at 75% of SOFC demand. Multiply them together, and Bloom alone accounts for about 50% of the world’s scandium oxide consumption. This may be conservative, as some of Bloom’s SOFC competitors, like the Asian giants licensing tech from Ceres Power (Doosan, Delta, Weichai), reportedly don’t rely on scandium.

That leaves another 50% — which, besides the other SOFC makers, is spread across aluminum-scandium alloys for aerospace, military, and automotive applications, as well as thin-film manufacturing for semiconductors and other specialty uses.

That means that Bloom plausibly consumed about 30 tons of global scandium oxide in 2025. What did 30 tons enable? According to analysts, Bloom deployed somewhere around 0.7 to 0.8 GW last year, once you count both new installations and the aging modules it swaps out in the field.5 That implies between about 37 and 43 tons of scandium oxide per GW, a very similar number to the bottom up approach.

Hunterbrook opted for the more conservative number: 37 tons per GW.

Wall Street’s models now assume Bloom deploys between 1 GW and 2 GW fuel cells in 2026 — the volume implied by the company’s raised revenue guidance of $3.4 to $3.8 billion — and scales toward 5 GW a year by 2030, the “manufacturing footprint” Bloom told investors it can already support on its April earnings call, with additional capex.

Analysts have chased the story upward: UBS raised its target to a street-high $350 after the Brookfield expansion, with RBC at $335, even as BMO warned the headline deals do not yet translate into firm contracted backlog.

That ramp is the valuation: At a recent price of $300 a share, Bloom commands a market value around $70 billion — more than 30 times sales and over 100 times forward earnings — and between 13 times and 20 times the billions of annual EBITDA that even a flawlessly executed 5-gigawatt ramp would generate based on sell-side models.

Assuming 5 GW of production in 2030, the company would need about 185 tons of scandium oxide a year — and once you count Bloom’s commitment to replace existing units under warranty (known as field replaceable units, or FRUs), its estimated demand climbs to roughly 220 tons by the end of the decade.

Add the rest of the market — other SOFC makers, aerospace and the aluminum-alloy crowd, et al — and total global demand runs from about 60 tons in 2025 to about 310 tons in 2030.6

That figure introduces some problems. Most importantly, supply.

SUPPLY

Supply does not keep up, even with the model bending certain assumptions in Bloom’s favor.

The model starts by assessing how much scandium is produced in the world now. For that, we counted every publicly available output figure from global suppliers we could find and got about 79.2 tons in 2025, roughly equivalent to the 80 ton figure calculated by the U.S. Geological Survey.

Then we added every announced scandium project and expansion we could find, on its own stated schedule, probability-weighting each one by how far along it actually is.78

Spurred by growing demand prospects from SOFC and auto industries, Western suppliers have signaled intentions to ramp up scandium production, though in reality most are still years from actually producing it. And even the Western supply that does come online may not be Bloom’s to buy — some of it is already optioned to a defense contractor, and at least one potential developer is chasing the auto market. It’s a market where more supply may mean more demand, and as more scandium comes online, more industries will want to adopt it.

In Australia, Sunrise Energy Metals’ project Syerston — designed for 60 tons a year — is only targeting a final investment decision in 2026, with first output around 2028. Lockheed Martin already holds an option on Sunrise’s first 15 tons a year to manufacture fighter jets. Sunrise’s stock has risen over 1,000% in the past year, driven by excitement around the opportunity to sell into the fuel cell supply chain.

And in the U.S., NioCorp’s Elk Creek project in Nebraska — whose primary focus is producing niobium but also plans to produce about 100 tons of scandium oxide a year — has begun pre-construction on a mine portal.

Formal groundbreaking awaits up to $800 million in debt financing the company has sought from the U.S. Export-Import Bank since early 2023. At an investor conference last month, NioCorp CEO Mark Smith said the company hopes to begin full construction by the end of 2026, with production of some products beginning in late 2029. He did not specify whether scandium would be among the first products produced.

But Washington’s interest in the project appears real. The Pentagon has committed up to $10 million in Defense Production Act funding to NioCorp and backs a joint scandium-alloy program with Lockheed’s Skunk Works.

Even in the best case, though, Elk Creek would not close the gap, especially as NioCorp’s stated focus for scandium is automobiles, namely aluminum-scandium alloys to lighten cars, not fuel cells. Peer-reviewed research has indicated that a major demand boost from the auto industry could put meaningful pressure on an already tight scandium market.

Assuming both Sunrise and NioCorp are likely to come online — with several other, more prospective projects less likely — global supply climbs from about 79 tons to about 240 in 2030.

Roughly 160 of that, about two-thirds, is Chinese. The remaining roughly 80 tons is spread across the rest of the world (after applying risk-adjustments to the production capacity of planned but unfinished Western projects). Under these assumptions, the global market enters a deficit. The gap widens every year, to more than 65 tons short in 2030.

Strip out China, and what’s left, the scandium a Western buyer could get its hands on outside the chokepoint, is not even close to enough. That’s why China reliance is necessary, even if not sufficient.

In the model’s expected case, uncommitted Western-deliverable supply covers about 12% of global demand in 2026 and falls to below 10% in 2027 and 2028 — the precise window of the Oracle ramp — before recovering to only about 20% by 2030.

The constraint doesn’t wait for 2030. It starts binding this year.

Some analysts are underwriting far more than the Street’s one-gigawatt base case for 2026 — SemiAnalysis reads Bloom’s raised guidance as implying 1.7 to 1.9 GW of shipments.9 Run a 2 GW year through the model, adding the replacement units Bloom’s aging fleet requires, and the company would need roughly 90 tons of scandium oxide in 2026 — more than one and a half times what the entire world consumed, for every purpose, in 2025.

Global supply does grow this year in the model’s expected case, to roughly 118 tons — but most of the growth, and roughly 86% of the modeled total production, is Chinese. After the rest of the market takes its share — Lockheed’s F-35 chain, aerospace alloys, competing fuel cell makers, about 35 tons in all — approximately 83 tons remain. To produce 2 GW, Bloom needs more than that, according to our model, pulling the global deficit forward from 2027 into 2026.

Others are more conservative. But the outcome isn’t all that different. Run the banks’ own deployment forecasts through the model — Morgan Stanley’s path to 4.7 GW in 2030, Jefferies’ to 5 — and, once the replacement units Bloom’s aging fleet requires are included (TD Cowen estimates about 300 megawatts of field replacements a year today, scaling toward 500), every published Wall Street deployment trajectory reviewed by Hunterbrook pushes the global scandium market into deficit by 2028, according to our estimates of consumption.

And one final consideration makes the picture even bleaker for Bloom.

Hunterbrook’s model includes every ton of scandium oxide supply, whether or not it is fuel-cell grade. But Bloom’s electrolyte does not appear to be made from generic scandium feedstock. Its 2012 offtake agreement with Metallica called for “high purity scandium oxide.” Sumitomo Metal Mining sells 99.9% pure scandium oxide for fuel cells to a customer that is likely Bloom.

The usable pool for Bloom could therefore be smaller than the headline supply number.

All of which is to say: Bloom’s claims of not having a single point of failure are mathematically unsupported. China is integral. And even with China, the math doesn’t work out.

“Right now in the Western world, there’s basically no scandium processing capability to speak of, or just very, very little,” John Mavrogenes, a professor of economic geology at the Australian National University, told Hunterbrook.” It would be a long road to say we’re gonna get serious about scandia.”

Bloom’s July 7 blog post espouses a somewhat different view — noting that scandium is more abundant than lead in the Earth’s crust, and that the amount needed for each cell is little more than “a sprinkle of salt.” But those observations say nothing about how much scandium Bloom actually needs, or can get, in the aggregate. And while the post acknowledges that the diffuse nature of scandium deposits makes mining it an “economics problem,” it implies that Bloom has solved this problem by figuring out that scandium “can be produced” from titanium and nickel waste streams around the world, which is widely known.

Yet again, Bloom says nothing about its actual scandium sourcing operations, nor does it acknowledge that the companies recovering and purifying scandium in this way at commercial scale today are overwhelmingly Chinese — including Bloom’s own suppliers. The flagship Western example, Rio Tinto’s Quebec operation, which recovers scandium from titanium processing exactly as Bloom’s post describes, produces about three tons a year — and the U.S. Defense Logistics Agency is already seeking to buy 6.4 tons from Rio over five years for the national defense stockpile.

And China’s grip on rare earth exports may grow even tighter later this year.

Every scandium shipment leaving China already requires a case-by-case export license under an April 2025 export-control regime that has never been paused, with only select exceptions. But a second, more sweeping set of controls — suspended as part of the Trump-Xi trade truce — snaps back into place automatically on November 10, 2026, unless the truce is extended.

Under Beijing’s “0.1% rule,” modeled on Washington’s own chip controls, any product made anywhere in the world containing Chinese-origin rare earths would itself need a Chinese export license to be sold onward. These rules would presumably reach Bloom’s waypoints in places like Thailand, Japan, and Korea directly.

President Trump left May’s Beijing summit without a rare earths deal, and the White House said only that China had agreed to address shortages of several rare earths, scandium among them.

Beijing doesn’t need a formal ban to act: April 2025 controls took effect, Chinese exports to the U.S. of yttrium — controlled under the same announcement as scandium — collapsed from 333 tons in the eight months before the block to 17 in the eight months through the end of 2025.

No announcement. Just licenses that never came.

THE FIRST OUT

That leaves one lever inside Bloom’s own control, assuming the company hasn’t secretly built a massive stockpile over the last two decades:10 Use less scandium per cell.

Bloom’s patents describe how this could potentially happen. Cheaper co-dopants to cut the scandia fraction. Thinner electrolytes to cut the volume. Push both hard enough and it could drag the market back toward balance early next decade.11

But there is no public evidence we could find that Bloom has reduced the scandium in its cells as of 2026.

And its own patent record argues it can’t easily, because Bloom itself identified under-doped scandia as a cause of accelerated fuel cell aging. Its patented remedy was more dopants, not less.12 Cutting scandium trades directly against stack life, on which Bloom’s 10-to-15-year service contracts and warranty economics depend.

Bloom’s own July 7 statement comes to a similar conclusion: The company says it “has developed other materials that can perform a similar role,” but that scandium “remains the best choice for our current fuel cell platform.”

Unless Bloom accelerates that transition away from scandium, or unless Western mines come online faster than their current schedules suggest, the shortfall leaves Bloom reliant on the same risky Chinese supply chain it repeatedly promised investors it does not depend on.

THE OTHER OUT: MANUFACTURED DEMAND — THE FINANCING MACHINE BEHIND BLOOM’S RECORD QUARTERS

There is one other scenario in which Bloom wouldn’t have a scandium problem: Maybe the 5 GW of demand never shows up — and maybe it’s not even close.

Evaluating this possibility starts with the question: Who is actually buying all the fuel cells that make up Bloom’s revenue and backlog today?

RING AROUND THE ROSIE

The answer, on Bloom’s own books, isn’t hyperscalers — at least not directly. Bloom’s new major sources of revenue are financing vehicles Bloom itself part-owns, which buy the equipment and deploy it in projects serving end customers.

In total, nearly half of Bloom’s 2025 revenue came from buyers Bloom helped create.

Of the $2.02 billion Bloom reported for the year, $892 million — 44% — came from related parties, according to the company’s 10-K. And $862.1 million of that came from the Brookfield “Fund JVs,” entities that did not exist until August of 2025. That is, in roughly five months, joint ventures that Bloom co-owns became the source of approximately 43% of its annual revenue.

In the fourth quarter of 2025, $574 million of Bloom’s $778 million in revenue came from related parties. In the first quarter of 2026, it was $373 million of $751 million.

The related parties include joint ventures formed in August 2025 with Brookfield, with names like Bolt US JVCo LLC and ORC HoldCo LLC. Bloom holds a 9.9% stake in one and 15% in another; Brookfield and its AI fund hold the rest. Bloom sells to these entities and can recognize product revenue when control of the equipment transfers, even when the counterparty is a financing affiliate rather than the ultimate user of the equipment.

Bloom’s own filing acknowledges that its “customers” may not be customers in the way investors assume. A footnote to the concentration-of-risk section states that in certain transactions the counterparty “may be a project-finance affiliate rather than the ultimate end user of the products.”

The filings show Bloom booking this revenue not just before deployment, but before it may even send a bill. A new line item appeared on Bloom’s balance sheet in 2025 — $62.3 million of “non-current” contract assets, revenue recognized where “billing milestones have not been reached” and invoicing sits more than a year out. The line didn’t exist in 2024; 78% of it is related-party.

It raises the question: Where do all the boxes go after the joint ventures buy them?

The answer isn’t clear.

In the eight months from when the deal was formed through March, during which Bloom booked more than $1.2 billion in related-party revenue, nearly all from sales to the Brookfield joint ventures, the partnership has not publicly named its end customers. The $5 billion announcement in 2025 specifically promised a European AI factory site “that will be announced before the end of the year.” It never was, at least not in a direct enough way for Hunterbrook to find — and the companies’ June 30 announcement of a $25 billion expansion nine months later makes no mention of the European site at all.

The closest thing to a named tenant is a company Brookfield created itself. In February, Brookfield launched Radiant, a “vertically integrated AI infrastructure company” formed by merging its in-house venture with a London startup, Ori Industries. Radiant describes itself as the “first compute deployment vehicle and second seed investment” of Brookfield’s AI Infrastructure Fund — the same fund whose first seed investment was the Bloom framework — and, per trade press reporting, it will get first dibs on capacity at the fund’s new sites.

Radiant has announced no chief executive — its leadership appears to be a Brookfield managing director serving as executive chair and the startup’s founder as president — and no publicly named customers.

What it has announced is what it will buy: Radiant is an “NVIDIA Cloud Partner“ whose AI factories will be “based on the NVIDIA DSX reference design“ and stocked with Nvidia’s latest chips. Nvidia, in turn, anchors the Brookfield fund.

The circle closes itself: Nvidia backs the fund; the fund’s vehicles buy Bloom’s fuel cells; the boxes await AI factories whose designated first tenant is Brookfield’s own cloud company; and that company exists to buy Nvidia hardware. At every point in the loop, the demand comes from inside the partnership.

But you might not know this was the end customer from listening to Bloom’s executives. Bloom hasn’t mentioned “Brookfield” since the first earnings call after the partnership was formed.

On the other hand: None of this is exactly concealed. It’s disclosed in footnotes. Deloitte flagged the JV accounting as a critical audit matter.

BACKLOGGED BACKLOG

Bloom, in any case, isn’t being valued primarily on any one customer.

It is being valued on the dream of behind-the-meter power. And, for investors, there are two numbers on a balance sheet where dreams generally come true: backlog and remaining performance obligations.

The weird part: In Bloom’s case, those two numbers diverge.

Bloom’s most recent quarterly filing put its RPO at $441.1 million for products and installation, plus $51.5 million for service, as of March 31, 2026.

Its backlog was an order of magnitude larger: $20 billion total, with $6 billion of the backlog attributable to product revenue specifically.

The mismatch is explained by Bloom’s own definitions. Under ASC 606, RPO captures one thing: the transaction price of binding contracts, for obligations not yet fulfilled.

Bloom’s 10-K defines its backlog, an unaudited number, far more expansively, as “revenue attributable to existing contractual commitments for the purchase or use of Energy Servers by a financier or an end customer,” a figure that “reflects anticipated ITC and other tax incentives as applicable.”

Read those clauses one at a time.

“Or use” means the backlog counts arrangements where no one has committed to buy anything, only to take power.

“A financier” means a commitment from a financing vehicle, like the Brookfield joint ventures Bloom part-owns, counts the same as an order from an actual customer.

And “anticipated ITC” means the backlog includes tax credits Bloom hopes to receive from the U.S. Treasury (money from the government), folded into a number marketed as customer demand.

The service side stretches further still: Bloom counts “5 to 20 years” of future maintenance revenue in its $14 billion service backlog while disclosing, in the same paragraph, that those contracts are “subject to termination for convenience on an annual basis.”

The audited service RPO, the portion that actually binds, is $25 million.

This is not how others in the industry do it.

GE Vernova’s 2025 earnings release shows a backlog of $150 billion and defines the term as “remaining performance obligation.”

‍Oracle, Microsoft, CoreWeave, and Baker Hughes all market the same number their auditors sign.

Quanta Services, which does fold estimates into its backlog, labels the figure “a non-GAAP financial measure” and reconciles it quarterly.

Across the peers Hunterbrook analyzed, the widest gap between a marketed backlog and audited obligations was about 2x. Bloom’s is above 40x. (Even just isolating the analysis to product revenue, and excluding servicing revenue, the gap is 14x.)

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And the quality of that backlog is unclear, as Bloom’s keystone projects appear to be delayed.

‍DECEPTION IN THE DESERT

In April, Bloom issued Oracle a warrant to buy 3.53 million Bloom shares at $113.28 apiece — roughly $400 million of stock, fully vested and immediately exercisable, on terms the companies had agreed to back in October 2025.

Four days later, Oracle announced it was expanding its partnership with Bloom to “up to” 2.8 gigawatts — only 1.2 GW of it actually contracted.

Bloom’s stock soared. So, too, did the value of Oracle’s warrants. A win-win.

Weeks later, Oracle made another announcement that boosted Bloom’s stock price: The hyperscaler said that a single New Mexico data center campus — Project Jupiter, intended to house infrastructure for OpenAI — would run on up to 2.45 GW of Bloom cells.

Whether Jupiter gets built in the next couple years is itself an open question.

The 17.77-mile gas pipeline required to feed the facility is stuck, as research firm SemiAnalysis reported. And Oracle recently told regulators: “Without a reliable source of natural gas, the power plant that will generate electricity for the data center campus cannot function.” That’s because Bloom’s fuel cells need methane at the campus.

Due to regulatory delays for Oracle’s gas pipeline, SemiAnalysis already pushed its base case for first power from 2027 to 2029. Hunterbrook interviews with four New Mexico officials and a group suing to stymie Oracle indicate it could be delayed into the 2030s, or canceled altogether.

The New Mexico Environment Department (NMED) spokesperson told Hunterbrook it decided on Thursday that Oracle must face opposition at a public hearing. Oracle’s goal: getting a key air permit for emissions from Bloom’s fuel cells.

NMED decided to hold the hearing after public comments were contaminated. Local news reported Oracle’s canvassers collected names and contacts from residents, then submitted supportive comments using their identities, even if the person opposed data centers. Locals found out from an automated NMED email thanking them for input. An Oracle spokesperson denied wrongdoing to local news.

Agency spokesperson Drew Goretzka called it “unprecedented” in an interview with Hunterbrook. He said that NMED “may be pursuing civil or criminal prosecution.” Deputy Cabinet Secretary John Rhoderick at the air permit regulator concluded, “They’re trying to pad the bet with more positive comments.” Without the permit, Oracle cannot install fuel cells, according to the interviews. Bloom’s cells are its sole source of power.

Secrecy is how Jupiter arrived in the desert. The project began with mysterious LLCs that hid their real ownership behind misleading names — Green Chile, after the state’s pepper, and Acoma, after a Pueblo tribe that made the LLC stop using its name due to no relationship.

Only after the New Mexico Environmental Law Center (NMELC) filed lawsuits did the LLCs reveal they were Oracle, building one of the world’s largest data centers for OpenAI.

And Bloom only became part of the project after Oracle withdrew its earlier permit application, which involved even more emissions.

Kacey Hovden, an attorney at NMELC, told Hunterbrook that Oracle’s application is “incredibly incomplete” and “wildly underestimated” emissions from Bloom’s fuel cells, a claim supported by the emissions reports from Bloom’s troubled Wyoming data center, which contradict the New Mexico data.

“Bloom Energy has a really messy past, and I think that they’ve been trying to push this product for seems like decades, without really anyone biting. And I think the data center industry propped them up at just the right time, because it seemed like they were about to go under,” she said. “It’s not this clean energy solution that they claim it to be.”

The backlash now runs throughout the local government. The New Mexico Foundation for Open Government sued over Oracle-related emails. A state legislative aide pointed Hunterbrook to a bill that senators will file next session to block new data centers statewide. The county commission chair Manuel Sanchez laughed when Hunterbrook asked how the outcry compares to past issues. “There’s no contest, this has had by far the most public outcry,” he said, citing residents’ alarm over emissions, water, and the disposal of “hazardous waste.” Hovden specified “benzene and formaldehyde,” and said, “Bloom has a history in California actually of dumping that waste into just local landfills, which then of course impacts folks’ soil quality, water quality, and everything in between.”

Hovden estimated that first power is now likely “early-to-mid 2030s.” Reuters reported last week that Blackstone’s QTS terminated a Virginia data center after “years of local opposition and litigation.” Hovden’s conclusion about Jupiter: It may not happen at all.

‍WYOMING

The prospects for Bloom’s other flagship project seem to be worsening too.

The timeline of the apparent anchor of AEP’s $2.65 billion fuel-cell investment, a plant near Cheyenne, Wyoming, slipped from “no later than 12/31/2028” in AEP’s February investor deck to “no later than 2030” in its May deck, a potential delay of up to two years in under 90 days.

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The data center campus that plant would power reportedly lost its developer in June, when Crusoe was pushed out after the prospective anchor customer — allegedly Google, which has reportedly signed nothing — raised concerns about costs and timelines.

AEP’s CFO disclosed the mechanics on the May earnings call: If the offtake conditions failed by the end of June, the “hyperscaler” customer would get six months to find the equipment another home “anywhere in the U.S.”

If that extension fails, AEP has indicated the utility could force the hyperscaler to pay it back at roughly 110% of “all capital and costs incurred” on the fuel cells.

Whether this would force Bloom to slash its product backlog, nearly 40% of which can be traced to the AEP deal, according to a recent note from analysts at Jefferies, is less clear.

Asked whether AEP would take delivery of fuel cells before its end-customer contracts were final, Sridhar told analysts that Bloom’s servers are “not perishable” and can be redeployed. On the next quarter’s call, he referred to the fuel cells as “portable and fungible.” That is, Sridhar is claiming the boxes can be delivered regardless of whether the specific project moves forward.

“Can,” however, doesn’t mean “will.”

Asked whether it would take delivery of the fuel cells, or instead have its hyperscaler customer reimburse incurred costs at 110%, AEP directed Hunterbrook to the public statements it has already made — including the updated earnings deck.

This is not the first time AEP has run a similar route with Bloom. In the fourth quarter of 2024, AEP agreed to procure up to 1 gigawatt of Bloom’s fuel cells. The first 100 megawatts weren’t bought by AEP’s utility, or by any end customer. They were bought by AEP Development Services, or “Devco” — a subsidiary financed entirely by the parent company’s internal money pool, created to buy the fuel cells and resell them to AEP’s Ohio utility once each installation is “mechanically complete.”

By December 31, 2024, within weeks of the order, Devco’s construction-work-in-progress stood at $457 million, per AEP’s own 10-K. A year later: $480 million. Just $23 million of progress in 12 months.

And the demand the boxes were bought ahead of never really showed up. The end customers were supposed to come through an Ohio program that let AEP sell customer-sited fuel-cell power to data centers. According to the 10-K, that program yielded signed customer contracts for 98 megawatts — about a tenth of the gigawatt AEP contemplated buying. Then the program effectively stalled: Ohio House Bill 15, signed in May 2025, repealed the statute it ran on, “grandfathered the two existing PUCO approved contracts” and barring new ones.

However many Bloom boxes AEP procures, Ohio’s demand under this program is now seemingly frozen at the 98 megawatts already signed.

Even that remnant is contested: In September 2025, according to AEP’s 10-K, an intervenor challenged the approval before the Supreme Court of Ohio, “claiming that the order was unlawful, anti-competitive, and discriminatory.”

That is the pattern, captured in audited numbers on both sides of a single transaction, a year before the Brookfield vehicles existed. Bloom can book revenue, immediately; the buyer can park the equipment in a financing entity; and the demand the purchase was meant to serve is a question for later.

Wyoming is the same architecture at a larger scale. This time AEP’s CEO says the company is doing “a little bit of earthwork” on the site and “waiting for the full release,” indicating it hasn’t frontloaded the entire payment.

‍BIG BUZZ, FEW DEPLOYMENTS

To sum it all up: The two flagship destinations — Project Jupiter and Cheyenne — are delayed, apparently until at least 2029 and 2030. The Brookfield vehicles that accounted for half to three-quarters of recent revenue have not named a site. And Bloom’s existing deployments are relatively insubstantial.

One data-center fleet Bloom can verifiably point to belongs to Equinix, the world’s largest data-center colocation provider. The partnership began in 2015 as a one-megawatt pilot at a single Silicon Valley facility. A decade later, Bloom’s February 2025 announcement celebrating the milestone put the tally at roughly 75 megawatts operating across 19 Equinix data centers in six states, with 30 more under construction. But in its own chief commercial officer’s words, the fuel cells are “supplementing grid power,” not replacing it. That’s a very different use case than the story driving Bloom’s AI boom.

There is also an alleged 14-megawatt CoreWeave site in Illinois whose commissioning, slated for the third quarter of 2025, Hunterbrook hasn’t been able to confirm; and a Nebius deal that Hunterbrook’s OSINT traced to a New Jersey site where the neocloud seems to buy the power, not the fuel cells, meaning the undisclosed equipment owner is potentially a Brookfield vehicle.

Satellite imagery of the CoreWeave and Nebius sites shows both appear to be making slower progress than initially planned. At Nebius’ New Jersey facility, between 30 and 39.6 MW of generation capacity is installed, according to Hunterbrook estimates — roughly 9% to 12% of the 328 MW deployment that Nebius and Bloom announced on May 20, 2026, which the companies said was “expected to be operational this year“. At CoreWeave’s facility in Volo, Illinois, Hunterbrook estimates roughly 1.6-2.8 MW of installed Bloom generators. Though Bloom has never disclosed the planned fuel cell capacity at Volo, even when measured against the building’s 14 MW power capacity, the installed base amounts to no more than a fifth.13

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Bloom also was included in a Texas air permit application for 248 MW of power for a data center in Pawnee, which was approved in June.

The upshot: If the 5 GW ramp is real, the scandium constraint binds, and Beijing holds the off-switch. But it’s unclear there is really as much demand for Bloom’s fuel cells as investors seem to think.

After all, the big headlines for Bloom are often reflective of the same deals at different stages of development — such that a $25 billion “framework,” a $20 billion “backlog,” and billions in “revenue” are not necessarily three independent proofs of demand.

To varying degrees, they can be the same boxes at three stages of one pipeline — financed by a fund using LP money, sold to affiliates ahead of end customers, meant to power data centers that in many cases do not yet exist.

‍DO YOU HAVE DÉJÀ VU?

Yogi Berra said it best: It’s déjà vu all over again.

In October 2021, Bloom announced that Korea’s SK ecoplant — which ultimately took a roughly 10% equity stake in Bloom and became a related party — had committed to purchase “a minimum of 500 megawatts” of power through 2024, which amounted to an estimated $4.5 billion in equipment and service revenue.

The committed volumes propped up Bloom’s 2022-2023 results. Then Korea’s procurement policies shifted and deliveries stalled. Bloom’s fourth-quarter 2023 revenue fell 23%. And that December, the companies re-announced a “500 MW sales agreement” in which — by the press release’s own arithmetic — roughly half was undelivered volume from the 2021 commitment, just re-signed with three extra years to comply.

SK ceased to be a related party on July 10, 2025, and sold the last of its stake on April 13, 2026.

Brookfield’s financing framework with Bloom was conveniently formed within weeks of SK ceasing to be a related party.

Even the earlier Bloom business model ran through a captive buyer.

In 2011, in exchange for Bloom’s pledge of 900 factory jobs, Delaware lawmakers authorized a surcharge on every Delmarva Power bill.

The surcharge obligated the utility’s roughly 300,000 ratepayers to buy the output of 30 MW of Bloom boxes through 2033. It was pitched to the public as a “small fee” averaging about 67 cents a month. Within two years, it was running closer to $5 or $6. In a single year ending May 2019, state records reviewed by Forbes show ratepayers paid $34 million for the Bloom units’ electricity — power that, when Delmarva resold it into the regional grid, fetched just $9 million. The $25 million difference was that year’s subsidy.

The jobs came up 600 short. Bloom delivered 302 and returned more than $1.5 million under the deal’s clawback provision. But the surcharge remains on Delaware bills today, with seven years left to run.

The counterparties change — a state, a Korean conglomerate, a fund — but the structure doesn’t: Someone other than an end user guarantees Bloom’s numbers, on terms that look better at the announcement than in the accounting.

The people who sign those numbers keep changing too. Four different people have held Bloom’s top finance job since the start of 2024 — and five since 2020.

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Former CFO Randy Furr retired effective March 30, 2020, seven weeks after Bloom announced its financial statements could no longer be relied upon after the report by Hindenburg Research.

Former CFO Greg Cameron departed in April 2024.

His successor, former CFO Dan Berenbaum, lasted 12 months.

For the year that followed — the year the Brookfield joint ventures were formed and related-party revenue reached 74% of a quarter — Bloom had no permanent CFO at all: Its chief accounting officer, Maciej Kurzymski, served as acting principal financial officer.

The most recent CFO hire, Simon Edwards, arrived April 13, 2026 from Groq — where, per Bloom’s own 8-K, he had been CFO for only three months and then CEO for just three months.

Bloom’s CEO, by contrast, has never changed. Sridhar has run Bloom for 25 years.

AUTHOR

Till Daldrup is an investigative journalist who joined Hunterbrook from The Wall Street Journal, where he focused on open-source investigations and content verification. In 2023, he was part of a team of reporters who won a Gerald Loeb Award for an investigation that revealed how Russia is stealing grain from occupied parts of Ukraine. He has an M.A. in Journalism from New York University and a B.S. in Social Sciences from University of Cologne. He’s also an alum of the Cologne School of Journalism (Kölner Journalistenschule).

Dhruv Patel is an investigative journalist based in Cambridge, Massachusetts, specializing in data-driven reporting. He helps spearhead investigative coverage at The Harvard Crimson, and his reporting has been cited and discussed by The New York Times, CNN, The Boston Globe, ABC News, and BBC, where he also frequently contributes commentary. A John Harvard Scholar at Harvard College, he studies computer science and economics to leverage machine learning for accountability journalism.

Jean Wang is a machine learning engineer and data scientist at Hunterbrook Media. Previously, Jean worked on the alternative credit and fixed income desk at Magnetar Capital, studied Math at Yale University, and served as an editor for the Yale Daily News.

Blake Spendley joined Hunterbrook from the Center for Naval Analyses (CNA), where he led investigations as a Research Specialist for the Marine Corps and US Navy. He built and owns the leading open-source intelligence (OSINT) account on X/Twitter, called @OSINTTechnical (over 1 million followers), which also distributes Hunterbrook Media reporting. His OSINT research has been published in Bloomberg, the Wall Street Journal, and The Economist, among other top business outlets. He has a B.A. in Political Science from USC.

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. He helped build Fenway Strategies into one of the preeminent strategic communications firms in the country—with side quests speechwriting for Michael Bloomberg, running the surrogate remarks operation on the Biden-Harris campaign, and co-founding Mayday, which is now one of the leading information providers on how to access reproductive health care in states with bans. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

EDITOR

Vikas Kumar joined Hunterbrook from The Capitol Forum, where he led the corporate investigations team for a decade as a senior editor. He was previously an attorney at Gordon Feinblatt, a trial attorney for the Department of Justice, and a law clerk for a federal judge. He has a J.D. from University of Virginia School of Law and a bachelor’s from Emory University. Vikas is based in Maryland.

Michelle Cera, Jenny Ahn, Nathaniel Horwitz, and Ceci Moffit contributed reporting.

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Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please contact ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work opportunities, and press@hntrbrk.com for media inquiries.

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By: Michelle Cera, Laura Wadsten

Editor: Sam Koppelman

Based on Hunterbrook Media’s reporting, Hunterbrook Capital is short $ENSG and long a basket of comparable securities at the time of publication. Positions may change at any time. This article is not investment advice or a recommendation to buy, sell, or hold any security. Hunterbrook Media is collaborating with organizations like law firms including Hunterbrook Law to pursue reform based on this reporting. See full disclosures on our website.

Ensign caregivers and residents have reached out to Hunterbrook Media since we published our June 8 article. Their accounts corroborated our findings — and added new, firsthand evidence of resident hunger, payroll falsification, understaffing, and staff licensing issues. Ensign has not issued a public response to our reporting, even as the company quietly attempted to reassure Wall Street.

The Ensign Group ($ENSG) won’t respond to Hunterbrook Media’s reporting.

The company has not replied to repeated emails or phone calls. It didn’t respond to Bloomberg News, either. And it did not engage when Hunterbrook sent a billboard truck to its headquarters, instead sending security after the driver.

But since we published our investigation into America’s largest chain of nursing homes, staff who have worked at Ensign’s facilities have flooded Hunterbrook’s inbox with harrowing accounts of conditions inside those facilities. The company, meanwhile, has expanded its stock repurchase authorization to $100 million.

One certified nursing assistant (CNA) claimed their facility — where they had worked for a decade — was stripped of resources when Ensign took over. They even claimed to have won a company award for cutting its food budget as residents went hungry.

The alleged award isn’t on display, the CNA said: “It’s not something to be proud of.”

The kitchen is allegedly kept locked, so staff find ways to sneak in for food. The CNA said they once drove to a nearby Sonic, on their own time and their own dime, to buy a hungry resident a hamburger. The CNA makes $16.75 an hour.

That CNA wasn’t alone.

The accounts that reached Hunterbrook after our investigation into Ensign came from Texas, Arizona, California, and Tennessee. Most sources spoke on condition of anonymity, fearing retaliation. Their stories corroborate our reporting and add firsthand detail of the often grim reality inside Ensign facilities.

Asked what had changed the most since Ensign took over, the CNA from Tennessee answered: “The dignity of our residents.”

Weight Loss, Hunger

The award, the locked kitchen, the Sonic run — and there was more.

The same CNA in Tennessee told Hunterbrook about the food residents do get served. “They’re getting like half-cup-sized portions,” they said. “Like if you were on a weight loss diet.”

Federal law requires nursing facilities to provide each resident with a well-balanced diet that meets his or her specific dietary needs. Yet research still finds malnutrition and food deprivation across the industry.

A separate CNA at an Ensign facility in California recounted similar nutritional shortcomings. Though some residents had conditions with specific dietary needs, like diabetes or hypertension, they said, everyone was served the same thing.

“I don’t think it’s adequate,” the CNA told Hunterbrook about the food served to residents. “It’s not healthy at all.”

And because the floor is so short-staffed, the CNA said, residents with dementia who can’t feed themselves are simply left unfed. “Then the patients end up losing weight, and they just go downhill.”

Shortages and Locked Supply Closets

Hunger is one symptom of a broader refusal to spend on necessities.

Three people who worked for Ensign described severe shortages of even the cheapest supplies. A former licensed practical nurse (LPN) wrote in about a constant lack of basic materials for patients who were often in “very acute” need, with “numerous wounds.”

In Tennessee, a CNA said it went beyond shortages: Essentials were rationed and locked in closets only management could open. Staff bought soap and deodorant out of their own pockets to preserve some basic dignity for residents.

In California, another CNA described the same locked closets. “For the first year or more we didn’t have access to bottles of soap,” the CNA said. “They’re trying to save money or something.”

Staff, allegedly, weren’t given the alcohol pads needed to clean catheter drainage tubes, the California CNA said — so “people just empty it … and then just close it up again.”

This could lead to urinary tract infections, according to the CNA. “That could kill them.”

Inflating Nursing Hours

The shortages weren’t the only thing being hidden.

Independently of each other, both Tennessee employees described a scheme to make the facility look better staffed than it was: Nonclinical workers logged as floor CNAs.

Hours for people employed in office, housekeeping, and dietary roles were recorded as CNA hours, an employee explained — inflating the facility’s reported nursing time so that, in their words, “they don’t have to staff more CNAs for that shift.”

The LPN flagged the same alleged practice — “the use of CNA credentials for staffing purposes while employees were primarily working in non-direct care roles.”

The CNA also described a repeated situation where their hours were misreported: inserting lunch breaks they never took, and inflating their hours, including one shift logged as 19 hours. “I know I didn’t work 19 hours,” they told Hunterbrook.

They raised it with HR, which claimed it was a mistake. Within weeks, they said, another shift showed up documented as 19 hours.

Misclassifying staff hours to inflate the facility’s reported nursing hours would also inflate the facility’s CMS 5-star ratings for staffing and overall — as Hunterbrook found was the case in our initial investigation.

The Tennessee CNA described how this plays out in real life.

In keeping with Hunterbrook’s finding that registered nurse hours fall after Ensign acquires a facility, this CNA estimated the building now has a single RN for 67 patients.

Sometimes, they said, staff need help transferring a patient out of bed, but there are no extra hands.

“These people are wanting their showers. It’s impossible.”

An LPN who worked at an Ensign facility in Texas said there often weren’t even enough CNAs to take patients to the bathroom.

“I care deeply about the residents and have watched conditions deteriorate despite raising concerns internally,” they said in an email.

Practicing Above Their License

Understaffing doesn’t just shortchange residents — it pushes the problem onto employees with the lowest certification levels and pay scale.

When the schedule comes up short, our investigation found, Ensign fills the gap not by hiring, but by leaning on overworked, under-credentialed staff. That leaves frontline workers an impossible choice: Jeopardize their license to keep residents safe, or stop at what they’re legally allowed to do and watch patients go without care.

The Tennessee CNA described RN coverage simply vanishing from a shift: “If that person didn’t have an RN title and wanted that shift, then they would probably just throw another LPN in down there,” they said. “There just wouldn’t be an RN on shift.”

The LPN in Texas lived the consequences of this staffing model — left, as a new LPN, responsible for some of the sickest patients in the building without adequate support. “I was too ignorant at the time to realize my license was in jeopardy the longer I worked at this facility,” they told Hunterbrook in an email.

The California CNA recalled months when the floor had at most one RN — and the only RN providing hands-on care was the assistant director of nursing. Otherwise, LPNs staffed the floor alone. LPNs in California are not licensed to independently perform critical tasks such as ventilator management or administering IVs.

It is the definition of a moral quandary — staff forced, shift after shift, to choose between their professional code and the residents in front of them. Ensign has built a workforce of people who, in the Tennessee CNA’s words, “put 110% into their residents’ care” while quietly absorbing the legal and ethical risk of a staffing model designed to spend as little as possible on care.

The Texas LPN told Hunterbrook that their experience at Ensign made them stop working at skilled nursing facilities altogether. “I loved my patients and wanted nothing but the best for them,” they said in an email, “but it was so hard on the soul to see the neglect.”

While Ensign has not replied to repeated requests for comment from Hunterbrook Media and other news outlets, the company has quietly spoken with Wall Street.

Sell-side analysts at RBC Capital Markets and UBS Securities published notes reassuring investors — after conversations with Ensign management. The company also spoke directly with hedge funds invested in $ENSG.

Ensign’s staff, patients, and families of patients are still waiting for answers.

If you or a loved one has been affected, or if you have any relevant information to share, please reach out at ideas@hntrbrk.com. This is part two of a series on Ensign and the industry.

Authors

Michelle Cera trained as a sociologist specializing in digital ethnography and pedagogy. She completed her PhD in Sociology at New York University, building on her Bachelor of Arts degree with Highest Honors from the University of California, Berkeley. She has also served as a Workshop Coordinator at NYU’s Anthropology and Sociology Departments, fostering interdisciplinary collaboration and innovative research methodologies.

Laura Wadsten is an investigative journalist specializing in healthcare. She began her career reporting on antitrust and health care markets as a Correspondent for The Capitol Forum, a premium subscription financial publication. Previously, she was Executive Director of the nonprofit Moving to Value Alliance, where she produced the MTVA Unscripted Podcast. Laura was a Hodson Scholar and Editor-in-Chief of The News-Letter at Johns Hopkins University, where she earned a B.A. in Medicine, Science & the Humanities.

Editor

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. He helped build Fenway Strategies into one of the preeminent strategic communications firms in the country. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

Graphic

Dan DeLorenzo is a creative director with 25 years reporting news through visuals. Since first joining a newsroom graphics department in 2001, he has built teams at Bloomberg News, Bridgewater Associates, and the United Nations, and published groundbreaking visual journalism at The Wall Street Journal, Associated Press, The New York Times, and Business Insider. A passion for the craft has landed him at the helm of newsroom teams, on the ground in humanitarian emergencies, and at the epicenter of the world’s largest hedge fund. He runs DGFX Studio, a creative agency serving top organizations in media, finance, and civil society with data visualization, cartography, and strategic visual intelligence. He moonlights as a professional sailor working toward a USCG captain’s license and is a certified Pilates instructor.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please contact ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work opportunities, and press@hntrbrk.com for media inquiries.

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Nothing herein constitutes investment advice, a recommendation to buy, hold, or sell any security, or a solicitation to purchase or sell any securities. Hunterbrook Media is not a registered investment adviser in the United States or any other jurisdiction. All information and opinions presented are subject to change without notice.

Hunterbrook Media strives to ensure the accuracy and reliability of the information provided, drawing on sources believed to be trustworthy. Nevertheless, this information is provided “as is” without any guarantee of accuracy, timeliness, completeness, or fitness for any particular purpose. Hunterbrook Media does not guarantee the results obtained from the use of this information, and expressly disclaims any warranty, express or implied, as to accuracy or reliability. You should conduct your own research and seek advice from qualified financial, legal, and tax professionals before making any investment decisions based on information obtained from Hunterbrook Media.

The content provided by Hunterbrook Media does not constitute an offer to sell, nor a solicitation of an offer to purchase, any securities. No securities shall be offered or sold in any jurisdiction where such activities would be contrary to applicable securities laws. Hunterbrook Media authorizes redistribution of these materials, in whole or in part, for non-commercial, informational purposes only, provided that such redistribution includes this notice without alteration. Commercial use or alteration of these materials requires the express written approval of Hunterbrook Media LLC. By accessing this content, you agree to Hunterbrook Media’s Terms of Use.

Based on Hunterbrook Media’s reporting, Hunterbrook Capital is short $ENSG and long a basket of comparable securities at the time of publication. Positions may change at any time. This article is not investment advice or a recommendation to buy, sell, or hold any security. Hunterbrook Media is collaborating with organizations like law firms including Hunterbrook Law to pursue reform based on this reporting. See full disclosures on our website.

By: Michelle Cera, Andrew Ford, Laura Wadsten

Editor: Jim Impoco, Sam Koppelman

They beat the walls.

Cheryle Weir couldn’t breathe, her roommate recalled. Dependent on ventilators at an Ensign facility, they couldn’t talk. They couldn’t scream.

So they banged on the table, banged on the wall, desperate for anyone to hear. A nurse should have been there. No one was.

Eventually, Cheryle stopped banging.

Her family’s lawsuit blames her death on The Ensign Group ($ENSG).

Ensign is America’s largest operator of “skilled nursing facilities” (SNFs) — facilities designed to rehabilitate people who need less than hospital care, but more care than they can provide themselves.1

Ensign boasts about its star ratings, “industry-leading” clinical outcomes, and “strong history of quickly improving the quality of care in the facilities we acquire.” A sell-side analyst referred to Ensign’s quality star ratings as part of its “secret sauce.” And Ensign says it sets “the standard by which all others in our industry are measured.”

But a five-month Hunterbrook investigation found that standard is tragically low — and fatal.

The investigation revealed Ensign’s $10 billion empire is built on a dubious foundation: Its profits are heavily dependent on understaffing facilities. It performs better than average on self-reported quality metrics but worse on independently verifiable measures. It regularly violates state minimum staffing laws, and routes taxpayer dollars to its executives and to its own affiliates. Meanwhile, Ensign patients suffer and sometimes die.

“We could’ve had so much more time,” Weir’s daughter, Hanneka White, told Hunterbrook in an interview. “And it was taken away.”

Hunterbrook Media’s reporting team — led by three journalists, as well as former financial analysts from Goldman Sachs and Magnetar Capital — examined millions of Center for Medicare & Medicaid Services (CMS) datapoints, reviewed thousands of pages of documents, and interviewed dozens of sources, including: attorneys, professors, healthcare professionals, ombudsmen, data analysts, and public advocates, as well as former employees of Ensign, residents of Ensign facilities, and family members of Ensign residents.

Here’s the story:

• Ensign’s profits can be traced to providing less care than its patients need — and less care than it is meant to provide based on the tax dollars it receives from the government. Government programs pay skilled nursing facilities based on “acuity level,” a measurement of how sick the residents are. Ensign says it’s focusing on high-acuity people in order to increase its revenue, the bulk of which comes from government programs. But then it staffs many facilities below the levels needed to provide the care those payment rates are calibrated to support. Using the formula from a 2025 peer-reviewed study, Hunterbrook calculated a 5 million-hour gap between hours of nursing care needed and hours actually provided at Ensign facilities between July and November 2024, the period for which robust data is available. “The difference between those two numbers is fraud,” opined Ernest Tosh, an attorney who litigates nursing home abuse and neglect cases. Hunterbrook estimates that closing that staffing gap would have cost Ensign about $161 million during the period studied — or roughly $386 million annualized. That’s more than the company’s entire reported net income that year of $298 million. Hunterbrook also found that the more a facility profited from understaffing, the worse its health survey scores, facility-reported incidents, complaint deficiencies, total penalties, staff turnover, and staffing ratings.

• The Ensign Effect. We found Ensign’s growth strategy is to buy struggling nursing homes — then cut staff at those facilities and bank the savings, all while claiming quality improves. Ensign has rapidly built its $10 billion empire by rolling up distressed nursing homes, claiming to transform them into “market leaders in clinical quality.” But after Ensign acquires a facility, we found, nursing hours fall. Hunterbrook tracked 161 facilities before and after Ensign acquisition against roughly 15,000 other nursing facilities, controlling for industry trends. Bottom line: The quality of the facilities gets worse, not better, after Ensign acquires them.

• Federal and state laws prohibit understaffing. Federal law requires every Medicare- and Medicaid-funded nursing facility to keep “sufficient nursing staff” to meet each resident’s needs. The sicker the resident, the more staffing the law generally demands. Yet Hunterbrook found no consistent relationship between how sick Ensign’s residents are and how many hours it staffs. Four states where Ensign operates impose numeric floors on the care that must be provided: California, Washington, Tennessee, and Kansas. Our analysis of CMS records from 2020 through 2025 found Ensign facilities falling below the legal floors in those states on more than 18,000 days cumulatively. “You have to staff to meet the needs of residents, and that consistently does not happen,” said Ed Dudensing, an elder-abuse attorney, describing insufficient staffing. “That’s illegal.”

• Ensign’s superior “star” ratings are largely built on an honor system the company appears to be gaming. The CEO emphasized Ensign facilities “outperformed industry peers in 5-Star Quality Measure results” in a recent press release. He also highlighted “the highest quality clinical outcomes” in an earnings call last year. What he didn’t mention is that those measures are largely self-reported. We sorted CMS Provider Information performance metrics into three tiers: independently verified by unannounced government inspectors; self-reported but auditable via payroll records; or self-assessed and self-reported with no imposed documentation procedures. The result: Ensign performs worse when there is external verification.

• Ensign paid more than $339 million to its own affiliates in 2024. That’s about 8% of $ENSG revenue that year. The maneuver is known as tunneling. Our cost-report analysis shows Ensign facilities pay hundreds of millions of dollars a year to entities also owned or controlled by Ensign. Think: Landlords. Insurance. Transportation. “Home office” management fees. Hunterbrook found that, across the industry, more money going to related parties correlates with fewer staffing hours, more staff turnover, and lower health inspection scores, among other metrics. A 2024 congressional letter to Ensign’s then-executive chairman identified the industry practice as a “deceptive tactic” to hide profit. In an interview, Tosh, the attorney, shared his opinion of nursing homes tunneling money to related parties without any effective oversight: “It’s just a huge menagerie of corporations to hide the money movement. In effect it’s money laundering.”

• Former employees in different states described systematic misrepresentations. Fabricated Google reviews; document falsification; falls downgraded to “slips;” improperly upcoded patient acuity; and retaliation against staff who refused to engage in these activities. Former employees also told Hunterbrook they were compelled to provide unnecessary care and exaggerate its duration. One former Ensign therapist described higher-ups encouraging higher billing via falsifying minutes of therapy: “The 30 would be erased and somebody would put in a 70.”

• An industry lobbying group waged a multi-front campaign to kill a federal government rule meant to stop understaffing. In February of 2026, the Trump Administration rescinded a Biden-era rule setting a federal staffing minimum for nursing facilities, after the American Health Care Association (AHCA), an industry group, sued the government. Ensign and other operators backed a pro-Trump super PAC and Ensign gave $750,000 to MAGA Inc before the rule was rescinded. The now-defunct rule was estimated to save 13,000 lives a year.

• Behind all the numbers, patients suffer and die. Thomas Scates died after an Ensign facility neglected him, according to his family. Herbert Howenstein died after a large pressure ulcer developed at an Ensign nursing home. Six inches long, an inch deep, blackened dead flesh, penetrating to muscle. An EMT report shows that facility staff were aware but nobody was treating him for it. An expert reviewing his death concluded, “The patient’s demise was almost merciful.” A nonverbal resident with Alzheimer’s was found covered in ants with bites all over her body — an infestation discovered by her family, not the staff, according to an investigation report. Cheryle Weir died after begging for help that did not come in time, her daughter told Hunterbrook. These are just some of the stories Hunterbrook heard, which represent a fraction of the devastation in Ensign facilities around the country.

• Ensign did not respond to multiple detailed requests for comment from Hunterbrook. Ensign CEO Barry Port did, however, tell The Arizona Republic in 2023 that staffing is decided by individual facility management, and the suggestion that his company siphons money to boost profit is “categorically false.” Other statements by the company seem to contradict that supposed distance between Ensign and its individual facilities. In a recent earnings call, for example, Port cited access to patient-level data and involvement in facility-level decisions. The most recent 10-K also suggested there was visibility over individual facilities: Ensign said they use specialized software to help caregivers “more accurately” capture services to “increase reimbursement,” and that the company had “installed software and touch-screen interface systems in each operation.”

To see our full methodology, click here.

If you or a loved one has been affected, or if you have any relevant information to share, please reach out at ideas@hntrbrk.com. This is part one of a series on Ensign and the industry.

“They’re The Model”

Most of us will require institutional care in our lifetime. We hope that care will be high quality.

Faced with an aging population and widespread nursing shortages, every American nursing facility must contend with infections, falls, and sometimes death. On an average day, a facility might smell like human waste cut with cleaning products. Easy listening music covers the croaking sounds of uncomfortable residents. Frontline staff do their best at difficult and low-paying jobs, in facilities lit fluorescently and decorated in liminal beige.

But Ensign has established something worse: a business model that seems to depend on eroding care for America’s sick and elderly.

Our investigation shows the company boomed in recent years by rolling up distressed homes, cutting high-skilled nursing staff, and gaming metrics.

“They’re the model,” said David Kingsley, a retired professor at the Kansas University Medical Center who researches corporations that depend on revenue from Medicare and Medicaid.

Ensign operates the most CMS-certified nursing facilities in America, with 334 locations across 17 states.2 They offer more than 38,000 skilled nursing beds, according to a March filing.

But these facilities have problems — and they seem to get worse after Ensign takes over. Conditions at several of its facilities are so severe that they are candidates on CMS’s “Special Focus Facility” list, a roundup of facilities with a pattern of serious problems that pose risks to resident health and safety. Facilities on the SFF list are at risk of being terminated from Medicare or Medicaid programs.

And Ensign is coming for more. In the second quarter so far, it has announced purchases of 17 facilities in Texas, two in Wisconsin, and one each in Iowa and California (real estate only).

Ensign’s model is working. It grew rapidly after its current CEO took the helm in 2019. His $13.8 million in compensation last year — at a company whose revenue is largely derived from public funds — was mostly tied to company performance.

And Ensign does not limit incentive-based compensation to its senior executives. Our investigation found that some individual facility administrators are compensated the same way, creating powerful incentives to cut costs. While it’s normal to have financial performance incentives for cutting costs, it’s different when the incentive is to cut nursing hours — the results can be a matter of life and death.

For example, a lawsuit deposition shows the company tied a facility administrator’s bonus directly to location profits, and by staffing below recommended levels, that administrator was able to boost a roughly $400,000 annual bonus to more than $800,000.

As a result of understaffing at that very same facility, the lawsuit claims, a resident died, his final moments captured on a recorded phone call provided to Hunterbrook.

One source, a forensic accountant, likened the industry to the Sackler family’s opioid profiteering.

The Multimillion-Dollar Staffing Gap

To mask the sounds of screaming and crying, Doni Hunt Webb plays loud music.

“I know this is neglect and abuse,” she said.

She has lived in an Ensign facility in Utah for more than five years.

“I am a broken person now,” she told Hunterbrook, her voice sounding heavy. “I watch many people in here get broken.”

She described the daily reality of an Ensign facility, which she said was understaffed: persistent hygiene and medical failures.

Hunt Webb said she suffers from extreme nerve damage, a condition she said does not get adequate treatment due to persistent understaffing, turnover, and a lack of training.

At times, staff use wet paper towels in place of toilet paper, Hunt Webb said. She and other residents get recurring infections, she said, recalling that another patient cried and screamed after going a day without food, without being changed, left in a soaking wheelchair.

“The lack of staffing is the number one thing that affects residents’ quality of life,” the deputy state ombudsman in Texas, Alexa Schoeman, told Hunterbrook.

Dozens of studies show this is true.

Public money flows to Ensign and other skilled nursing operators based on the needs of their residents. But many simply don’t staff accordingly.

Each nursing facility funded by Medicare, Medicaid, or both is bound by federal law to have “sufficient nursing staff” to meet the needs of each resident, also referred to as patient “acuity.” The higher the acuity, the more staffing the law generally demands.

And Ensign residents tend to have higher needs than most.

That’s by design, former Ensign employees told Hunterbrook. “They were seeking out people with more complex needs,” said one former therapist. Administrators would deliberately “find the most complex diagnosis of that patient for the highest payback.”

Ensign’s own financial filings indicate their patients are “often high-acuity” and that their “business model is based in part on serving higher acuity patients.” As acuity goes up, so too should hours of care, according to federal law. But Hunterbrook’s analysis found no consistent relationship at Ensign.

CMS commissioned research to time how long it takes to care for residents at different acuity levels. It used this research to set Medicare payment rates, and it informed a federal rule requiring a minimum of 3.48 hours per resident day (HPRD) that was finalized but never put in force before industry lobbying and lawsuits helped convince the Trump administration to rescind it.3

Last year, researchers used those findings to help facilities understand how many nursing hours they need to meet their residents’ acuity — putting a number on the “sufficiency” standard enshrined in federal and state law.

Hunterbrook used this formula and worked with two of the researchers who developed it — Charlene Harrington, professor emerita of UCSF, and Robert McLaughlin, a healthcare data analyst — to calculate the expected number of hours Ensign residents should receive based on the acuity level they report to CMS. Harrington is a leading scholar of nursing home policy, who has spent decades researching the staffing levels needed to ensure safe, quality care.

Next, we calculated the difference between the hours of care patients should receive, based on reported acuity, and the number of hours Ensign actually paid nursing staff to work, according to Ensign’s own filings with the government. In other words, we calculated the gap between what Medicare paid Ensign to provide care and how much Ensign actually spent on nursing staff to deliver that care.

“The difference between those two numbers is fraud,” elder care attorney Tosh said about this gap across the industry.

In 2025, the California Attorney General used a similar technique in a complaint against the nursing home chain Sweetwater. In that case, California analyzed the same CMS database that Hunterbrook used here to allege that the chain systematically failed to meet resident care needs.

Our analysis found Ensign residents were shorted more than 5 million hours in just five months of 2024 — that’s more than 570 years of missing nursing time. The analysis is restricted to this time period due to data availability.

We next sought to translate those hours into dollars, again using Ensign’s own reports on its costs of staffing. We found that Ensign saved about $161 million during those five months by declining to staff its homes adequately. If the trend held across 2024, that’s about $386 million annually in savings on staffing costs, representing profit to the company. For context: That year, Ensign’s entire net income was $298 million.

Across all nursing facilities in CMS data, the profit from understaffing adds up to roughly $6.5 billion across the industry, just from July to November 2024.

Ensign ranks worse than peers: The spread is generally larger at Ensign facilities than the industry norm, according to Hunterbrook’s analysis.

“I think this work breaks ground and is really important because it puts a dollar figure on a staffing question that has been debated for decades,” said McLaughlin, one of the authors of the formula we used in this analysis, who reviewed our work and validated our methodology.

Even these eye-popping figures are likely understated because nursing home operators can inflate the care hours they report to CMS and manipulate their cost reports, according to experts Hunterbrook interviewed.4

With federal rules in flux, some states where Ensign operates have their own minimum staffing laws. A separate Hunterbrook analysis of CMS records suggests Ensign consistently violates the minimum hours-per-resident-day requirements of: California (3.5-hour) , Kansas (1.85-hour), Tennessee (2-hour), and Washington (3.4-hour).5

From 2020 through 2025, in these four states cumulatively, Ensign facilities fell below state minimums on more than 18,000 days.

These minimums represent the lowest staffing level the laws permit.

Ensign regularly fails to meet even that, despite serving residents who are sicker, on average, than those at peer facilities.

When asked directly about our findings regarding the staffing gap and failures to meet minimum staffing levels, Ensign didn’t refute them or offer additional data. The company didn’t respond at all.

There has been some conflicting research on the exact right level — a controversial 2023 study commissioned by CMS declined to recommend a specific minimum HPRD, finding, “no obvious plateau at which quality and safety are maximized.” But there’s good reason for these minimums. That 2023 study still found higher staffing was associated with fewer hospitalizations and emergency room visits.

Understaffing hurts people.

In July 2025, a CMS report shows, a nonverbal resident at an Ensign facility with Alzheimer’s disease was found in her bed covered in ants.

They crawled on her face, neck, legs, and swollen-shut eyes. They left bites all over her body.

Her family said they discovered the infestation — not the staff.

We found a clear pattern across the industry: As spending on staffing decreased, quality metrics deteriorated significantly, including health survey scores, facility-reported incidents, complaint deficiencies, total penalties, staff turnover, and staffing ratings.

“Customer Second”

Ensign trumpets the acronym CAPLICO across its internal communications, where the first “C” stands for “customer second.” As they explain in the 2026 Code of Conduct, “This means we put our employees first so that they are empowered and inspired to provide the best possible care to our residents/patients.”

A noble thought, perhaps. Yet in interview after interview with Hunterbrook, former employees recounted stories that contradicted Ensign’s purported commitment to its workers.

Robert Love told Hunterbrook that he’d worked as a cook at a Tennessee nursing facility for nine years before Ensign took over. After the sale went through in early 2025, he said, Ensign cut staff.

“You can’t have that mentality in a nursing home setting,” he said of the “customer second” motto. “We have to take care of them.”

Love fed residents grappling with Alzheimer’s disease and dementia. “And to take away resources from that is, I don’t even think that’s bad management. I think that’s just evil greed.”

After Ensign took over, Love said he became one of only two cooks serving roughly 90 residents, his pay was cut, and his hours were slashed. “That’s when I had to go look somewhere else,” he said.

The reduction in pay and hours led Love to take another job cooking fast food at a local gas station, where he made $5 more per hour than his wage at Ensign.

At an Ensign facility in San Antonio, the staffing shortfall was so severe that sometimes nurses would cook for residents, according to a former therapist.

A former physical therapy director for Ensign in Costa Mesa, California, said they were regularly told Ensign could not afford the cost of care.

“We don’t have the means to pay you more, so here, have a pizza party,” they recalled. “It’s kind of become a meme or a joke at this point.”

The data also undermines Ensign’s claimed commitment to its staff. Our analysis showed that when it takes over a facility, Ensign almost invariably cuts staff hours and shifts what hours remain from more skilled, higher paid caregivers to less skilled, cheaper ones.

Again, when asked about these findings, Ensign did not respond to repeated requests.

Staffing levels are not just words on a page or numbers on a spreadsheet — they have real, and sometimes fatal, consequences for Ensign residents.

In 2022, a resident at Ensign’s Clarion Wellness in Iowa was found suspended upside down between a bed rail and headboard, “completely purple and black,” a staff member recalled.

The resident had suffocated.

The facility had installed a grab bar on the resident’s bed without assessing the risk of entrapment, obtaining consent, or evaluating the risks for the resident who had a history of falls, according to findings from Iowa’s State Survey Agency.

Staff didn’t check on the safety of the mattress and bed rails, but a facility maintenance supervisor admitted he marked them as complete anyway. The surveyors also found no evidence that visual wellness checks of the resident were completed.

Iowa regulators condemned the Ensign facility as strongly as they could: They proposed a one-time $10,000 fine.

The same year, Ensign collected more than $8 million in revenue per day.

Self-Reported Metrics Versus Reality: What Happens When No One Is Looking

Over and over, Ensign and its executives swear that they care about patients.

“Our consistent financial results would not be possible without a relentless, patient-focused culture that strives to deliver the highest quality clinical outcomes,” the CEO said in an earnings call last year.

As evidence, the company often cites CMS Star Ratings on quality metrics. For example, in its first-quarter 2026 earnings press release, Ensign’s CEO, Port, touted that facilities “outperformed industry peers in 5-Star Quality Measure results by 24% nationally and 20% at the state level.”

The catch: These ratings are largely based on the honor system, meaning they are self-reported. CMS “does not impose specific documentation procedures on nursing homes,” for most of these metrics, relying instead on expectations of “good clinical practice.”

While higher ratings don’t necessarily mean better quality care, they are likely to matter a lot to an ailing patient or their stressed loved one looking for a nursing facility. The government itself points patients to a website comparing the star ratings of different facilities in order to “compare nursing homes for quality.”

When Hunterbrook first started looking at Ensign’s operations in 2024, there was no obvious reason to doubt Ensign’s quality of care, which appeared high based on its star ratings.

It was only later that we realized that, to a large extent, the quality metrics Ensign likes to cite are largely self-reported and self-assessed.

So, relying on performance metrics documented in CMS Provider Information data for Ensign’s facilities from January 2020 to March 2026, we took a closer look.6

Hunterbrook dove into performance metrics documented in CMS Provider Information data for Ensign’s facilities from January 2020 to March 2026. We separated the various available metrics into three tiers: Tier 1 — Independently verified by state survey agencies contracted by CMS who show up unannounced7; Tier 2 — Self-reported but based on verifiable payroll records and auditable by CMS8; and Tier 3 — Self-assessed and self-reported with no specific documentation procedures.9

We found Ensign outperforms on the metrics the company controls, and underperforms on many of the metrics it has less influence over.

Compared to the national average on Tier 3 ratings, Ensign performed 22% better on the overall quality measure rating, 24% better on long-stays, and 16% better on short-stays — metrics that exist on the honor system. These numbers are unsurprising, given the statistically significant correlation between improved star ratings and profit, documented by multiple studies, and accounts of multiple former employees who said the company underreported adverse events.

The picture looks a lot less rosy for Ensign on Tier 1 and Tier 2 metrics.

On Tier 2 (self-reported but auditable) metrics like registered nurse hours per resident day, Ensign was about 17% worse than the national average. Their staffing rating was 11% worse. And on facility-reported incidents, Ensign performed 38% worse.

Ensign also performed worse on many independently measured metrics (Tier 1): 20% worse on the number of complaint health deficiencies and more than 7% worse on infection control inspections.

Our conclusion: Ensign inflates its grades on metrics it controls, while a truer picture emerges when there is some level of independent verification.

For example, Park Village Healthcare and Rehabilitation in DeSoto, Texas, has five stars on Tier 3 quality measures on the CMS website — a rating that might lead a family or potential resident to think the nursing home is high quality.

The same facility’s one-star (“much below average”) ratings for independently verifiable metrics like health inspections and staffing tell a very different story.

Once more, Ensign did not respond to our questions about its apparent manipulation of the quality rating system.

Misleading ratings can have consequences.

At an Ensign facility in California, a patient had both legs amputated after staff ignored her doctor’s orders to isolate her during chemotherapy, her husband told Hunterbrook. He said the facility placed her in a crowded room next to a resident with pneumonia, and let an infection spiral into sepsis.

The patient’s husband mentioned that they chose the nursing home after reading online reviews and seeing good ratings.

Multiple former employees across different Ensign facilities confirmed for Hunterbrook that ratings were an important internal focus for the company. They described everything from management compelling them to write fake Google reviews to retaliation against employees for not properly manipulating metrics.

“Everything was done on paper,” a former therapist who worked for Ensign told Hunterbrook. A form would go from the facility to building management, who ended up “falsifying before sending it.”

Elizabeth Schlamann, a former certified medical aide for an Ensign nursing facility in Nebraska, told Hunterbrook that corporate directives to their staff were clear: Manipulate the resident assessments that inform star ratings.

“They would literally hold it against us as like a punishment,” Schlamann said, noting that if metrics such as falls and bed sores weren’t manipulated in the way corporate administration wanted them to be, promised perks were withheld.

Staff were also “heavily urged or encouraged” to engage in upcoding, according to Schlamann, a practice where residents are coded as more medically complex than they actually are to increase reimbursement from the government.

Twice when it was scrutinized by regulators, Ensign paid settlements topping $40 million to conclude claims it ripped off the government by billing Medicare for unnecessary treatment and for allegedly paying illegal kickbacks for patient referrals.10

A former speech language pathologist remembered receiving an exit survey before leaving the Ensign nursing home they worked at. The survey asked them if they had seen any unethical behavior or fraud, and promised a follow up call within 24 to 48 hours. They checked yes.

“I didn’t get a phone call,” they said.

The Ensign Effect: Sicker Residents, Fewer Hours of Care

Ensign is known for its aggressive acquisition strategy.

In financial filings, the company attributes much of its historical growth to acquiring SNFs. Ensign’s 2025 10-K claims a “strong history of quickly improving the quality of care in the facilities we acquire.” They point to “consistent improvement” in star ratings post-acquisition as evidence.

In reality, does the quality of care improve in the facilities Ensign acquires?

The data answers with a resounding “No.”

In fact, the analysis revealed what we’re calling “The Ensign Effect.”

When Ensign acquires a facility, the acuity — a measure of how sick residents are — stays higher than the national average, while care provided by higher-skilled registered nurses drops sharply, and total nursing hours go down noticeably too.

“The regulation is that you have to staff to meet the needs of the residents, and that consistently does not happen,” said Ed Dudensing, an elder abuse attorney for 23 years. ”That’s illegal.”

We used 72 months of CMS Provider Information records spanning January 2020 to March 2026 and tracked 161 facilities before and after Ensign acquired them, verified by CMS Change of Ownership records.

We then compared the changes at Ensign facilities to what was happening nationally at roughly 15,000 other facilities over the same time periods, using a technique called difference-in-differences that helps sift the Ensign Effect from broader industry trends.

The result? After Ensign takes over, total nursing hours fall at a statistically significant rate, and continue to fall over time.

The Ensign Effect is especially visible among their higher-paid and most highly skilled employees.

Before acquisition, the registered nurse hours of the facilities hover around the national average. After, a steady decline sets in and widens over the following years.

The drop in RN hours also leads to a change in the overall staffing mix.

An increased share of care hours are provided by Certified Nursing Assistants (CNAs) and Licensed Practical Nurses (LPNs), who are less highly trained than RNs and generally cannot provide complex medical assessments or treatments independently.

And yet, while overall nursing care hours and the share of those hours being provided by the most highly skilled professionals is dropping precipitously, somehow Ensign’s overall star ratings consistently improve at facilities it acquires.

How can that be?

Overall ratings — featured prominently on CMS’s Care Compare site where families shop for nursing homes — are built by starting with the health inspection score and then adding up to one star each for staffing and quality measures, including self-reported numbers. Under this methodology, self-reported data can lift a facility’s overall rating by as many as two stars: a 2-star health inspection can become a 4-star overall, and a 3-star can become a 5-star.

Staffing cuts and pushing work onto lower-skilled employees can have serious consequences, according to our sources.

Dominique Haynes, a former CNA at an Ensign facility in Texas, mentioned uncertified staff providing care.

“I constantly saw residents passing away,” she said, referring to the result of dialysis procedures performed by staff she thought were unqualified to do so.

Haynes also described chronic supply shortages. Each morning, she said she went “Easter egg hunting” for scarce supplies. She hoarded wet wipes. Catheters went unchanged, and residents were regularly left sitting in urine.

“They’re scared that they won’t be changed, or that they’re not going to get water, or they’re not going to be taken care of,” Haynes said.

Ensign’s staffing cuts might make sense if the overall patient population at facilities acquired by Ensign also had lower acuity over time. But because the government pays more for higher acuity populations, Ensign actually seeks to acquire facilities where patients are sicker than the national average, Hunterbrook found. Ensign says as much in their public communications, highlighting the sicker-than-average populations in their facilities and telling shareholders that while these struggling nursing homes might negatively affect margins at first, they typically contribute “to earnings within 12 to 18 months.”

The numbers suggest Ensign accomplishes this primarily by cutting down on the staff tasked with the survival of some of the nation’s sickest and most vulnerable people.

But it’s more than just numbers. Reverend Michael Southcombe routinely visited the Pine Crest nursing home in Merrill, Wisconsin. Then he learned the county-owned facility was slated to sell to Ensign. He grew worried about the quality of care under a corporate newcomer.

Driven by a zeal for justice, he became a leader of the grassroots group People for Pine Crest, protesting its sale.

They took their fight to county board meetings, with a self-described “five foot nothing, crippled little old lady,” in fierce opposition.

They got crushed.

The sale went through in 2025, and a group member told a local newspaper that 15 to 20 positions had already been eliminated, employees had their pay cut, and others lost hours.

Nurses are now stretched thin, response time has bloated, and staff that survived the cuts are working harder but getting paid less, Southcombe told Hunterbrook.

“The only way these companies make money is to not provide the care that they’re being paid to provide,” Southcombe said.

Some residents have loved ones who can care for them in the absence of Ensign staff, he added.

“I worry about the ones who are laying there in bed at some end stage of dementia who don’t have family coming to visit them,” Southcombe said.

“Who puts the straw in their mouth when they’re thirsty?”

A Poverty Myth

For years, patient advocates have pointed to understaffing as the single biggest driver of bad clinical outcomes at nursing facilities, and have pushed for regulatory reform in this area. The industry’s main lobbying group aggressively fights any movement toward mandated levels of staffing by claiming they would cause financial ruin.

That group, the American Health Care Association (AHCA), most recently took aim at a federal staffing requirement published in May 2024. It would have required all nursing facilities certified by CMS to provide a minimum of 3.48 nursing hours per resident per day, a level estimated to save 13,000 lives per year. AHCA filed a federal lawsuit the same month, claiming (among other things) that a majority of nursing homes have “negative operating margins” and that the rule would “force them to close their doors for good.”

The AHCA features a rotating cast of characters — and deep ties to Ensign. Ensign’s CEO Barry Port sits on the board of the AHCA, and a former president and CEO of the AHCA, Mark Parkinson, is now on Ensign’s board of directors.

In a 2025 earnings call, Port shared that he had also met with Congressional leadership regarding the staffing minimum. He said it was “to make sure they’re fully educated and understanding of what’s good for funding.”

Around then, Ensign and other major nursing home operators also contributed to a super PAC devoted to President Trump, according to a New York Times report.

And a Federal Election Commission filing showing contributions to MAGA Inc. confirms Ensign donated $750,000 to the president’s super PAC on August 8, 2025.

Continuing their full court press, industry representatives met with the president for lunch at his golf club in the summer of 2025, the Times article said.

By December 2025, the staffing rule was gone.11

Of course, the poverty narrative the industry relied on for its lobbying win is at least somewhat contradicted by the company’s own public statements when talking to another audience: Wall Street.

While AHCA was claiming financial hardship in court filings, Ensign’s CEO was trumpeting “record” and “extraordinary” growth in earnings calls in 2024.

“This plea of poverty when the CEOs are flying around on their private jets is a little hard to bear,” said geriatrician and director of the National Center on Elder Abuse, Dr. Laura Mosqueda.

How Public Funds Become Private Profit

How can Ensign report individual facilities struggling to make ends meet and massive profits at the corporate level?

One answer: A financial arrangement known as “tunneling.”

Here’s how it works: Ensign’s facilities pay separate companies that Ensign also owns or controls for functions like real estate, insurance, and administrative services. Many of these services are necessary to operate the business and each facility would have to pay someone for them. But experts told Hunterbrook that nursing home operators regularly charge themselves excessive, above-market rates when their own affiliates are involved — draining money that could go to staffing while making the facilities appear too financially strapped to provide adequate care.

For the executives at the top, this system works out rather well. Ensign’s CEO took home over $13 million in compensation in 2025. The CFO, almost $12 million. And more than $9 million went to the COO.

More than two-thirds of nursing home profits are tunneled to related parties, a study revised last year found. Another study based on data from 2019 found $1.95 billion in excessive related-party payments across the industry.

“The government is forking over billions of dollars to take care of older and disabled adults,” said Tony Chicotel, an attorney for California Advocates for Nursing Home Reform. “The owners are taking that money and spending the very minimum they can on care.”

A congressional letter sent in 2024 directly to Ensign’s executive chairman at the time, Christopher Christensen, cites these related-party schemes as a “deceptive tactic” the nursing home industry uses to hide profit.

Ensign facilities tunneled about $339 million in total to related parties in 2024, which made up about 8% of the company’s consolidated revenue that year, Hunterbrook found. That’s larger than Ensign’s net income, according to a 2024 financial filing, precisely what the congressional letter warned about.

And this figure is likely understated, given improper reporting to CMS.

“It’s just a huge menagerie of corporations to hide the money movement,” said Tosh. “In effect, it’s money laundering.”

The government prohibits excessive charges, but even when unreasonable costs are caught, CMS doesn’t claw back the money.

And as with understaffing, the data show a consistent pattern: The more nursing facilities pay related parties, the worse their outcomes across some measured dimensions — nurse hours, staffing ratings, turnover, and health inspection scores.

“If we weren’t funding all of this extra expense that comes out of the buildings to all these third parties,” a former Ensign administrator said, “then we would be able to operate and give very, very amazing care to these residents.”

Ensign did not respond to Hunterbrook’s repeated questions regarding its related party transactions.

Riverbend Post Acute Rehabilitation illustrates the dark side of this model.

The 131-bed Ensign nursing home in Kansas City, Kansas, was scarlet-lettered as a “special focus facility” by CMS, meaning it’s among the worst-performing and at risk of losing public funding

Riverbend is so bad, CMS doesn’t acknowledge it with a rating, but with a warning.

The Ensign facility has been the subject of multiple federal complaint investigations and health inspections. Riverbend was cited for “immediate jeopardy” — the most severe level — after a 2024 investigation found inadequate care led to a maggot infestation inside a resident’s body.

The facility has the money to care for its patients, Hunterbrook found, bringing in nearly $18 million in patient revenue in 2024. But the facility tunnels a massive portion of the money to other Ensign affiliates.

“How do you explain having that much revenue,” Kingsley said, “and yet they can’t take care of a special focus facility?”

Here’s how: In just one year, this nursing home reported more than $2 million in related-party transactions in its cost report to CMS.

Riverbend, meanwhile, has technically lost money in three of the last five years with available data. On paper, it’s barely staying afloat.

But this picture is misleading. Riverbend’s losses are a fraction of the $2 million it sent to Ensign. And this is the crux of the related-party scheme: make the nursing home appear poor on paper while the parent organization extracts its revenue.

In another example of prioritizing profit over care, Riverbend’s cost report shows it relies heavily on lower-cost certified nursing assistants (CNAs) over more expensive and skilled registered nurses.

The theme of replacing more skilled, higher paid workers with lower-skill, lower-cost workers came up twice in interviews with former employees.

A former therapist who worked for Ensign told Hunterbrook they were fired because their position meant they had to be paid more than others.

One former Ensign administrator in training, responsible for tracking expenses, confirmed the pursuit of lower-skilled labor.

“If we can get it cheaper from somewhere else, let’s get it cheaper,” they said, describing their view of Ensign’s mentality. “It doesn’t matter the quality.”

“There’s No Excuse for Killing People”

The dollars on Ensign’s balance sheet are abstractions. But behind them are real people who have been neglected, suffer, and sometimes die in Ensign facilities.

Take the story of Thomas Scates.

Air Force veteran, truck driver, firebrand minister. He thundered in church as he did in cheering his grandson on in football: “I’ll fly away,” he cried from the pulpit, “I’ll fly away.”

When his body started failing, he put his faith in an Ensign nursing facility. Ensign let him fall.

Overburdened nurses didn’t give him enough attention, his daughter, Sharon Thompson, told Hunterbrook. One misdosed his insulin, she said. Then he tumbled out of bed and called for help, but no one came.

“I don’t know how long he was on the floor before somebody showed up,” Thompson recalled.

Ensign staff just put him back in bed, Thompson said. The Scates family filed a lawsuit, later dismissed on technical grounds rather than the merits of the case, claiming he died because Ensign’s facility in Peoria, Arizona neglected him.

“They did not take him to the hospital,” Thompson added. “They did not call a paramedic.”

The family’s complaint claimed Scates’ injuries were preventable, yet the facility was chronically understaffed and undertrained in an effort to maximize profit.

Scates’ experience seems to reflect patterns Hunterbrook found across Ensign’s facilities. Our analysis concluded that Ensign has turned the suffering and neglect of the nation’s most vulnerable into a lucrative business model: seeking out medically complex residents to extract as much revenue as possible, siphoning hundreds of millions of dollars to Ensign’s own affiliates, pocketing vast sums by staffing below the level their residents need, and showcasing self-reported quality metrics to investors and the public.

The ethical conclusion is simple in the eyes of a professor widely known for her research and advocacy in this area, Charlene Harrington.

“When you have a multibillion-dollar corporation,” Harrington said, “There’s no excuse for killing people.”

If you or a loved one has been affected, or if you have any relevant information to share, please reach out at ideas@hntrbrk.com. This is part one of a series on Ensign and the industry.

Authors

Michelle Cera trained as a sociologist specializing in digital ethnography and pedagogy. She completed her PhD in Sociology at New York University, building on her Bachelor of Arts degree with Highest Honors from the University of California, Berkeley. She has also served as a Workshop Coordinator at NYU’s Anthropology and Sociology Departments, fostering interdisciplinary collaboration and innovative research methodologies.

Andrew Ford is an investigative journalist who exposed systemic flaws and prompted reforms in healthcare, business, policing and state government. His reporting was published by ProPublica, USA Today, The Arizona Republic, Asbury Park Press, and Florida Today. He holds a journalism bachelor’s from the University of Florida and received a data analytics master’s from Georgia Institute of Technology. He taught data journalism to investigative journalism master’s students at the Walter Cronkite School of Journalism and Mass Communication at Arizona State University. Andrew is based in Phoenix, Arizona.

Laura Wadsten is an investigative journalist specializing in healthcare. She began her career reporting on antitrust and health care markets as a Correspondent for The Capitol Forum, a premium subscription financial publication. Previously, she was Executive Director of the nonprofit Moving to Value Alliance, where she produced the MTVA Unscripted Podcast. Laura was a Hodson Scholar and Editor-in-Chief of The News-Letter at Johns Hopkins University, where she earned a B.A. in Medicine, Science & the Humanities.

Editors

Jim Impoco is the award-winning former editor-in-chief of Newsweek who returned the publication to print in 2014. Before that, he was executive editor at Thomson Reuters Digital, Sunday Business Editor at The New York Times, and Assistant Managing Editor at Fortune. Jim, who started his journalism career as a Tokyo-based reporter for The Associated Press and U.S. News & World Report, has a Master’s in Chinese and Japanese History from the University of California at Berkeley.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please contact ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work opportunities, and press@hntrbrk.com for media inquiries.

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By: Jenny Ahn, Till Daldrup, Blake Spendley

Editor: Sam Koppelman

Based on Hunterbrook Media’s reporting, Hunterbrook Capital is short $CSG.AS and long a basket of comparable securities at the time of publication. Positions may change at any time. This article is not investment advice or a recommendation to buy, sell, or hold any security. See our website for full disclosures.

• Czechoslovak Group (CSG.AS) has recently announced billions of dollars in contracts with unnamed “Southeast Asian” customers. It appears most of these transactions may actually be with just one counterparty: Indonesia, which CSG used to name explicitly in its filings. CSG’s announced deals tied to this customer since the IPO could amount to up to $2.8 billion, nearly a fifth of the size of CSG’s entire order backlog as of last year, suggesting CSG’s order book may be less diverse than it appears.

• Virtually all of CSG’s business in the country appears to flow through a single intermediary, Republikorp, a private Indonesian arms dealer. CSG has no disclosed manufacturing subsidiaries, offices, or employees in Indonesia. Republikorp’s founder, Norman Joesoef, is the son of Indonesia’s former ambassador to Slovakia and was initially named the CEO of Czechoslovak Group Indonesia in 2018, though references to that entity name have since disappeared.

• CSG’s history in Indonesia has been marred by controversy, including allegations of bribery and price gouging. In 2023, CSG’s Excalibur Army brokered a $792 million deal for the transfer of 12 used Qatari fighter jets to the Indonesian defense ministry that triggered a public outcry. An Indonesian outlet accused the overpriced deal of including a multi-million dollar kickback to then-defense minister and now-president Prabowo Subianto. Prabowo’s campaign team vigorously denied any kickback but ultimately canceled the deal after public scrutiny.

• Hunterbrook also found a paper trail that points to a potential multimillion-euro payment to an intermediary linked to CSG’s business in Indonesia. CSG’s subsidiary filings show a Singapore-based consultant, Irwan Bin Omar — who has operated under the Republikorp brand and described himself as a bridge between EU entrepreneurs and Indonesia — paid 410,000 euros toward a 24% stake in a CSG subsidiary in 2021. In its IPO prospectus, CSG discloses its re-purchase of the subsidiary as an “acquisition” worth 24.4 million euros, requiring a net cash expense of 17.9 million euros. Asked if CSG paid Bin Omar the 17.9 million euros, CSG did not respond to Hunterbrook’s repeated email and phone requests for comment, after previously engaging on Hunterbrook’s prior reporting about CSG’s production rates and IPO disclosures.

It is a weird transaction.

Buried on page 374 of the European defense conglomerate Czechoslovak Group’s 728-page IPO prospectus is a table describing an acquisition of a Slovak subsidiary called Vývoj Martin.

No counterparty is named.

The deal is relatively small — 24.4 million euros — the kind of purchase that’s easy to gloss over when analyzing the prospectus of what was a $30 billion company at the time of the IPO.

But Hunterbrook — whose deep-dive investigation of CSG published earlier in May sparked international coverage and a press tour from the defense conglomerate’s CEO1 — took a closer look.

What we found was odd. CSG already owned most of the subsidiary, Vývoj Martin, and seemed to be just buying back a minority share it sold earlier.2 The party CSG appeared to be buying out — a Singapore-based entity called RDBSG — had no known ties with CSG or any European defense companies, as far as Hunterbrook could tell. According to its Singapore registry filings, RDBSG is described as providing “human resource consultancy services.” It has no website and no known representatives other than its sole proprietor, a Singaporean national named Irwan Bin Omar.

Its address, as listed on a Slovak government register, matches a coworking space in an eastern commercial district in Singapore.

In 2021, RDBSG paid CSG a total of 410,000 euros for its stake in Vývoj Martin, Hunterbrook’s review of statutory filings suggests.

Three years later, CSG appeared to have spent about 18 million euros to regain those shares, the prospectus shows.

It’s unclear from the scant disclosures how exactly the cash flowed — and whether the entire 18 million euros in cash went to the shareholder, RDBSG, which would amount to an over 4,000% return on its 410,000-euro investment. But records reviewed by Hunterbrook suggested no other counterparties obviously involved in the transaction.

And CSG’s accounting treatment of the transaction suggests the 18 million euros is real cash that physically left CSG with the repurchase, according to JP Krahel, chair of Loyola University Maryland’s accounting department, whom Hunterbrook asked for an independent expert opinion on the puzzle.

As Hunterbrook dug deeper, our findings showed this transaction may be linked to billions of dollars in contracts CSG had recently announced with unnamed customers in Southeast Asia, where the Czech arms dealer apparently has no employees.

Hunterbrook found, based on our research of defense publications, social media, and CSG’s own past disclosures, that the unnamed Southeast Asian customers may all tie back to just one country — Indonesia — with the deals channeled through a single intermediary, an Indonesian arms dealer called Republikorp.

Those deals would add up to a number roughly equivalent to a fifth of CSG’s total 15 billion euro backlog as of 2025. But more than half of that backlog is related to ammunition sales, contingent on meaningfully expanding production — which may prove to be more difficult than CSG has described to investors, as Hunterbrook found in our previous investigation.

That means the Indonesia sales could amount to nearly half the non-ammunition-related backlog reported by CSG.

And Republikorp, the single conduit of that massive sales channel, seems to be linked with RDBSG, the mysterious counterparty that may have earned a big payday when CSG bought back Vývoj Martin.

NOTE: CSG did not respond to repeated requests for comment — and its filings are (perhaps intentionally!) very ambiguous. So it’s unclear what, exactly, happened here. There could be another, better explanation. If you have one, email ideas@hntrbrk.com.

CSG’s Decade-Long Ties to a Mystery Customer Behind Billions in Orders

In February, 13 days after the IPO, CSG announced a $300 million armored vehicle deal — “the largest export order” of the platform to date. Two months later, another press release announced a $2.5 billion air-defense mega-package. Together, the deals represent nearly a fifth of the size of the total backlog the company reported for the past year.

In each case, CSG identified the buyers only as customers in “Southeast Asia.”

CSG’s April announcement of the $2.5 billion deal also included a list of past deliveries to the same “region” — worded in a way that might lead a reader to assume CSG has a diversity of customers across Southeast Asia.

But CSG was not always so coy. In late 2022, CSG’s subsidiary Excalibur International explicitly named the buyer for a medium-range air-defense system — very likely the same MRAD delivery referenced in the April announcement3 — as Indonesia. And in 2024, Indonesian press confirmed Republikorp was also cooperating with CSG’s majority-owned subsidiary Fiocchi Munizioni on ammunition production — consistent with the small-caliber ammunition contract “in the same region” that CSG referenced in its April announcement.

The 2022 deal — which also included a ballistic missile system and had a price tag of more than 500 million euros — came on the heels of another key deal between CSG subsidiary Excalibur Army and Republikorp for the purchase of 122 rocket launchers on Tatra chassis, potentially worth tens of millions of dollars.4

A screenshot of an alleged 2023 Indonesian foreign ministry document posted on a Facebook group for Indonesian military enthusiasts summarizes other strategic agreements between Republik and CSG subsidiary Excalibur International, facilitated by the Indonesian government.

No other Southeast Asian country appears to have had a similar level of cooperation with CSG or institutional infrastructure that could serve a similarly scaled deal, according to Hunterbrook’s review. The only other deal in the region Hunterbrook could identify was what appears to be a 2022–2023 subcontract for 10 armored vehicles supplied to the Philippines through Israel’s Elbit Systems.

But that contract doesn’t seem to have been material enough for CSG to break out the Philippines in the revenue section of its annual disclosures. In CSG’s 2023 and 2024 annual reports — before the company switched to the less granular region-based reporting post-IPO — Indonesia appears to have been the only Southeast Asian country it felt compelled to identify specifically.

The recent $2.5 billion mystery deal appears to be a continuation of the same 2022 air defense system deal.

According to CSG’s press release, the recent contract includes the delivery of complete batteries of multi-layer air defense systems and will utilize Tatra chassis. That’s pretty much how the architecture of the 2022 missile defense systems was described as: Turkish-made missile launchers mounted on Tatra chassis.

Deliveries of a Turkish system mounted on a Tatra chassis began in 2025; a regional defense outlet reported that military enthusiasts spotted a tactical ballistic missile system at an Indonesian army base in Borneo, mounted atop 8×8 Tatra trucks.

At a minimum, those who follow Indonesian military news appear convinced CSG’s mystery customer is Indonesia. In response to a recent article on the $2.5 billion CSG deal published by Indonesian defense news outlet Airspace Review — which did not mention Indonesia as a potential candidate for the unnamed Southeast Asian customer — 300 commenters largely expressed their belief that the mystery customer is Indonesia.

CSG’s Indonesia Deals Marred by Local Controversy

The Indonesian government — along with Republik and CSG — may have its own reason not to publicize the multibillion-dollar deal, given the recent controversy that had previously linked the three names.

In 2023, Excalibur International brokered a $792 million deal to transfer 12 used fighter jets from the Qatari Air Force to the Indonesian defense ministry. Indonesian investigative outlet Ceri reported that Republikorp served as an intermediary for the deal, citing rumors among Indonesian defense ministry officials. The deal, translating to $66 million per jet, triggered an outcry among the Indonesian public, who accused the government of overpaying for old jets that Qatar had once offered to Indonesia for free.

A few months later, a report alleged the deal included a 7% kickback — worth about $55.4 million — to then defense minister Prabowo Subianto, including a $20 million upfront payment.5 Prabowo’s campaign team — he was running for the 2024 presidential election — immediately denied the allegation, describing it as fake news. Indonesia eventually scrapped the deal, citing budget limitations.

The Ambassador’s Son

Across CSG’s deals in Indonesia, virtually everything appears to flow through a single private intermediary: Republikorp.

Republikorp’s founder and chairman is a man named Norman Joesoef.

Norman Joesoef appears to be the son of Harsha Edwana Joesoef, a prominent Indonesian businessman and former diplomat. The elder Joesoef is the founder of the RPX Group, Indonesia’s FedEx licensee — and, from 2009 to at least 2012, he served as Indonesia’s ambassador to Slovakia. That posting placed the Joesoef family squarely in the Czech-Slovak diplomatic orbit.

A 2022 social media post celebrating Norman Joesoef’s daughter cites Harsha Joesoef as her grandfather. A 2019 social media post also suggests Harsha Joesoef is Norman Joesoef’s father. Republikorp’s address on its website is the same as the Jakarta headquarters of the Joesoef family’s logistics company RPX in Jakarta.

Norman Joesoef founded Republikorp in 2013 after returning from his studies in Prague, where he was allegedly inspired by a college colleague working in a European defense conglomerate. Joesoef’s school years in Prague likely overlapped with CSG CEO Michal Strnad’s budding career at his father’s company starting in 2010, at around age 17.

Hunterbrook couldn’t confirm if the two actually knew each other in Prague, but what is clear is that the two men have since been doing business together at an enormous scale — and the corporate paper trail connecting Republik to CSG is unambiguous.

One prominent example: In 2018, Strnad pledged to invest $100 million in a new industrial park in Indonesia, to be headed by Norman Joesoef as the CEO of Czechoslovak Group Indonesia, according to Indonesian Antara News.

The reference to Czechoslovak Group Indonesia appears to have disappeared since then, however, with Republikorp — helmed by the same Joesoef — seemingly emerging as CSG’s Indonesian counterpart, creating at least the appearance of an independent entity.

Hunterbrook repeatedly attempted to ask CSG about all of these relationships — also reaching out to Republik, Norman Joesoef, and Bin Omar. Nobody responded to repeated requests for comment.

But one answer may live in that mysterious payment.

A Mystery Figure Tied to the 24.5 Million Euro “Reacquisition” of a Subsidiary

In December 2021, CSG transferred a 24% stake in a Slovak subsidiary, Vývoj Martin, to a Singapore-registered entity called RDBSG, whose sole proprietor is a Singapore national named Irwan Bin Omar. The agreed-upon price was 5.85 million euros, according to a filing by Vývoj Martin’s parent company, MSM Group, with the Slovak commercial registry.

Bin Omar paid 410,000 euros up front. He never paid the rest. The share transfer deal got canceled.

MSM Group’s 2023 annual report says the remaining purchase price “was supposed to be paid, but this did not happen.6” The parties rescinded the deal, with the reverse transfer of shares expected to occur by the end of 2024 and the return of the deposit on the purchase price by no later than mid-2025, MSM Group’s filings show.

That reversal was recorded in CSG’s 2024 annual statement, and on its 2026 IPO prospectus.7

But the way CSG booked this transaction was interesting.

The payment for the reacquisition of those shares was listed as 24.4 million euros — suggesting an over 300% premium on the 5.85 million euros selling price for the shares in 2021.

The magnitude of that valuation increase is also seemingly contradicted by CSG’s own prior disclosures that put the carrying value of its retained majority shares in the subsidiary as having increased far more modestly — at just 16% between 2021 and 2024.

But it gets even weirder. CSG also reported the value of its pre-existing shares in Vývoj Martin as zero — contradicting CSG’s own disclosure, as mentioned above, that its existing shares in Vývoj Martin were worth roughly 18 million euros as of 2023.

The rules of International Financial Reporting Standard 3 (IFRS 3) — the accounting method CSG used for the business combination — are quite clear, as Krahel confirmed to Hunterbrook. “When a company consolidates an entity which it had partially owned, it has to disclose the fair market value of its ownership stake immediately before the acquisition date,” Krahel explained. This disclosure is supposed to go on the “Investment value as of the control acquisition” line of the IFRS table – which, in CSG’s case, was zero.

The implication of this accounting choice — besides being inconsistent with IFRS — could be that the entirety of CSG’s carry value of its existing shares was impaired to nothing, without explanation. Alternatively, CSG may have just wanted to present the acquisition as a fresh one, with the 24.4-million-euro price tag representing the value of the entire entity, and with CSG’s existing interest in the entity buried somewhere in that overall figure.8 That would, potentially, obscure the exact amount of any payment that went to Bin Omar.

Either way, that 24.4 million euro price tag seems to have led to a cash expense from CSG of 17.9 million (24.4 million net of about 6.5 million cash that was held by Vývoj Martin), as recorded in CSG’s prospectus.

The bottom line is, according to the accounting, CSG seems to have spent about 18 million euros as part of a deal to buy back shares it had sold for just 410,000 euros three years prior.

To whom did the 18 million euros go? We don’t know.

But we found no other counterparties aside from Bin Omar related to the reacquisition disclosed by CSG or its subsidiaries.

CSG did not respond to Hunterbrook’s questions about any of it.

But one potential clue may come from the identities of RDBSG and its sole owner, Irwan Bin Omar.

Among Bin Omar’s extensive list of corporate entities he owns is one called Republikorp Project Management Services Pte. Ltd., since renamed the more nondescript Research and Development Innovations.

Hunterbrook could find few details about Bin Omar, but the Republikorp name may be no coincidence. It matches the name of Norman Joesoef’s company, CSG’s counterparty in Indonesia.

On his own archived website for Republikorp, Bin Omar describes his work as providing foreign companies that “seek to sell their advanced products and services to Indonesia” with “solutions to the administration processes” in the Southeast Asian country. He says he is well-versed in the political context of Indonesia and ASEAN. He studied political science on a joint Singapore-Indonesia scholarship at Gadjah Mada University in Indonesia.

One promotional article appearing on a Chinese outlet in 2017 also described a man with the same name as a member of the Indonesian presidential staff, though Hunterbrook could not independently verify the claim.

After CSG repeatedly ignored emails about Bin Omar — and Republikorp — a Hunterbrook reporter called the company’s spokesperson. “Please communicate in written form,” the spokesperson said.

When the reporter pointed out Hunterbrook’s emails had gone unanswered, and asked for clarity, the spokesperson hung up.

Authors

Jenny Ahn joined Hunterbrook after serving many years as a senior analyst in the US government. She is a seasoned geopolitical expert with a particular focus on the Asia-Pacific and has diverse overseas experience. She has an M.A. in International Affairs from Yale and a B.S. in International Relations from Stanford. Jenny is based in Virginia.

Till Daldrup is an investigative journalist who joined Hunterbrook from The Wall Street Journal, where he focused on open-source investigations and content verification. In 2023, he was part of a team of reporters who won a Gerald Loeb Award for an investigation that revealed how Russia is stealing grain from occupied parts of Ukraine. He has an M.A. in Journalism from New York University and a B.S. in Social Sciences from University of Cologne. He’s also an alum of the Cologne School of Journalism (Kölner Journalistenschule).

Blake Spendley joined Hunterbrook from the Center for Naval Analyses (CNA), where he led investigations as a Research Specialist for the Marine Corps and US Navy. He built and owns the leading open-source intelligence (OSINT) account on X/Twitter, called @OSINTTechnical (over 1 million followers), which also distributes Hunterbrook Media reporting. His OSINT research has been published in Bloomberg, the Wall Street Journal, and The Economist, among other top business outlets. He has a B.A. in Political Science from USC.

Editor

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. He helped build Fenway Strategies into one of the preeminent strategic communications firms in the country. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

Graphic

Dan DeLorenzo is a creative director with 25 years reporting news through visuals. Since first joining a newsroom graphics department in 2001, he has built teams at Bloomberg News, Bridgewater Associates, and the United Nations, and published groundbreaking visual journalism at The Wall Street Journal, Associated Press, The New York Times, and Business Insider. A passion for the craft has landed him at the helm of newsroom teams, on the ground in humanitarian emergencies, and at the epicenter of the world’s largest hedge fund. He runs DGFX Studio, a creative agency serving top organizations in media, finance, and civil society with data visualization, cartography, and strategic visual intelligence. He moonlights as a professional sailor working toward a USCG captain’s license and is a certified Pilates instructor.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please contact ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work opportunities, and press@hntrbrk.com for media inquiries.

LEGAL DISCLAIMER

© 2026 by Hunterbrook Media LLC. When using this website, you acknowledge and accept that such usage is solely at your own discretion and risk. Hunterbrook Media LLC, along with any associated entities, shall not be held responsible for any direct or indirect damages resulting from the use of information provided in any Hunterbrook publications. It is crucial for you to conduct your own research and seek advice from qualified financial, legal, and tax professionals before making any investment decisions based on information obtained from Hunterbrook Media LLC. The content provided by Hunterbrook Media LLC does not constitute an offer to sell, nor a solicitation of an offer to purchase any securities. Furthermore, no securities shall be offered or sold in any jurisdiction where such activities would be contrary to the local securities laws.

Hunterbrook Media LLC is not a registered investment advisor in the United States or any other jurisdiction. We strive to ensure the accuracy and reliability of the information provided, drawing on sources believed to be trustworthy. Nevertheless, this information is provided “as is” without any guarantee of accuracy, timeliness, completeness, or usefulness for any particular purpose. Hunterbrook Media LLC does not guarantee the results obtained from the use of this information. All information presented are opinions based on our analyses and are subject to change without notice, and there is no commitment from Hunterbrook Media LLC to revise or update any information or opinions contained in any report or publication contained on this website. The above content, including all information and opinions presented, is intended solely for educational and information purposes only. Hunterbrook Media LLC authorizes the redistribution of these materials, in whole or in part, provided that such redistribution is for non-commercial, informational purposes only. Redistribution must include this notice and must not alter the materials. Any commercial use, alteration, or other forms of misuse of these materials are strictly prohibited without the express written approval of Hunterbrook Media LLC. Unauthorized use, alteration, or misuse of these materials may result in legal action to enforce our rights, including but not limited to seeking injunctive relief, damages, and any other remedies available under the law.

By: Till Daldrup, Evan Comen

Editor: Sam Koppelman

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, does not have any positions related to this article at the time of publication. Positions may change at any time. Full disclosures on our website.

This is the latest investigation in Hunterbrook Media’s investigative series on the poisoning of American communities. For decades, polluters have sickened towns and cities across the U.S. by releasing toxic chemicals. Hunterbrook has built a nationwide database to expose harm to communities and ecosystems, then hold accountable those responsible. After reporting from Illinois, Nebraska, California, Texas, Louisiana, New Mexico, and Indiana, this investigation takes us to Virginia. Hunterbrook Media has also investigated environmental damage and harm to communities due to industrial activity spanning from Namibia to Argentina to Peru. Please email ideas@hntrbrk.com if you suspect pollution or poisoning in your community.

Separately, ICYMI: Hunterbrook Media posted a thread on X recapping our work over the past three months — from an investigation of a European defense giant to a feature on a hidden photonics supplier in Taiwan. Repeatedly, our reporting has been validated, including this month in a big way. Read more. And stay tuned for our next article, which we plan to publish… tomorrow.

When Louisa Alice Dickison found out last year that the air her daughter is breathing may cause cancer, she felt she could not stay silent.

“I had no choice, ethically and morally, as a mom in this community, it felt imperative for me to put myself out there just to tell people what was going on and give them the facts,” Dickison told Hunterbrook Media.

Dickison recently turned her Instagram profile public to start posting videos and stories about the cancer risk that ethylene oxide (EtO) emissions from medical sterilizers and warehouses handling medical equipment could pose to people living in Richmond, Virginia., and its suburbs.

She lives in the vicinity of two medical sterilization facilities: The Central Virginia Health Network/Bon Secours Mercy Health sterilizer in Northwestern Richmond and Sterilization Services of Virginia’s (SSV) facility in Henrico.

Dickison started talking to community members and learned most of them were unaware that these facilities were located near their homes. “Virtually nobody knows,” she said.

In late March, she attended a town hall meeting organized by the environmental nonprofits Southern Environmental Law Center and Virginia Interfaith Power & Light that aimed to raise awareness about ethylene oxide and Biden-era emissions rules for the chemical that the EPA is attempting to roll back.

Two weeks after this meeting, Sterilization Services of Virginia’s facility in Henrico accidentally released more than 500 pounds of ethylene oxide, according to records from the Virginia Department of Environmental Quality (DEQ). Early on April 9, a faulty check valve released 580 pounds of liquid EtO onto the roof of the facility. As temperatures rose to 50 degrees Fahrenheit, the chemical evaporated and “dispersed into the atmosphere,” according to a DEQ air inspection report.

The release at SSV likely exposed more than 260,000 people living nearby to elevated levels of ethylene oxide, a Hunterbrook analysis shows.

A plume model that Hunterbrook generated using the National Oceanic and Atmospheric Administration’s (NOAA) HYSPLIT tool shows that the evaporated ethylene oxide soon reached residential neighborhoods about a mile from the facility. The tool takes into account local weather conditions at the time of the release.

Dickison said she has not been notified by authorities about this release and first learned about it when Hunterbrook asked her about it. Her nine-year-old daughter was with her father that day and would have been right near the sterilization facility.

“I’m horrified,” Dickison said.

The DEQ issued a notice of violation on April 24, stating that the released EtO amount goes beyond what the facility is allowed to emit in an entire year, according to its permit. The notice says SSV needs to show regulators how it aims to “correct the cause of malfunction and to prevent its recurrence.”

A DEQ spokesperson told Hunterbrook that SSV responded to the notice of violation and submitted a corrective action plan, which includes the installation of an EtO release alarm system and new pressure relief check valves, as well as regular check valve testing and replacement.

Sterilization Services of Virginia did not respond to repeated requests for comment.

Data Shows Elevated Cancer Risk Around Sterilizer

SSV uses ethylene oxide as a sterilizing agent for medical devices. The chemical plays a crucial role in our healthcare system, but it’s also a ruthless carcinogen. In 2016, the EPA in a revised toxicity assessment concluded it is 30 times more carcinogenic to adults — and 60 times more so to children — than previously thought.

Ethylene oxide is linked to blood cancers like leukemia, non-Hodgkin lymphoma, and multiple myeloma, as well as breast cancer. In 2024, under the Biden administration, the EPA issued stricter rules that require commercial medical sterilizers and large chemical plants to reduce their ethylene oxide emissions. The EPA now aims to roll those regulations back.

Henrico County — which includes SSV’s facility and its immediate surroundings — has an overall incidence rate across all cancer types that’s just slightly above the state average, according to National Cancer Institute data for 2018 to 2022.

But the picture changes drastically when the data is filtered for cancers that are associated with ethylene oxide exposure and population groups that actually live in the vicinity of SSV’s medical sterilization site. Henrico County snakes around the state capital, Richmond, in the shape of a dumbbell. While the western part is mostly white and Asian, the eastern part — where SSV is located — is primarily Black.

The county has the third-highest leukemia incidence among Black residents in the entire state. It also ranks seventh for non-Hodgkin lymphoma and ninth for early breast cancer cases among Black patients. That’s out of 95 counties in Virginia.

Hunterbrook’s plume model analysis indicates that Black residents are indeed more impacted by emissions from SSV’s facility than members of other racial groups: 71% of people who live in census blocks where modeled ethylene oxide concentrations reached or exceeded 1 microgram per cubic meter for at least 30 minutes during the April 9 release are Black.

“The evidence is undeniable that ethylene oxide is a chemical that absolutely increases the health risks to people who are breathing this in on a consistent basis. The fact that it’s in a predominantly Black community cannot be ignored,” said Monica Hutchinson, president of the Henrico County NAACP. “The [Trump] administration has proven to be extremely hostile to anything to help safeguard or protect the Black community and other vulnerable communities.”

SSV’s facility is not the only polluter in the area. Richmond International Airport is nearby, as well as a large landfill. But cancer data and the county’s population distribution suggest that incidence rates of cancers associated with ethylene oxide exposure are elevated among people who live near the SSV building.

Science would suggest that people in close proximity to a facility that’s emitting thousands of pounds of ethylene oxide per year have an elevated cancer risk, Joe Goffman, a former assistant administrator in the EPA’s Office of Air and Radiation, told Hunterbrook.

“Ethylene oxide has always been known to be a carcinogen that presents a level of risk that the Clean Air Act recognizes and deems it appropriate for regulation,” he said.

Trump Issued Exemptions From Stricter Rules

Sterilization Services of Virginia is one of 40 medical sterilization facilities that in July 2025 received a two-year presidential exemption from Biden-era ethylene oxide rules that would have imposed new emissions-control requirements on commercial sterilizers.

The Virginia DEQ told the Henrico Citizen, a local news organization, that, notwithstanding the exemption, the Sterilization Services of Virginia facility is already meeting the requirements under those new regulations.

“In 2025, SSV installed additional control equipment to further reduce their emissions of EtO,” the DEQ said in a written statement to the Citizen. “They began operating this new equipment in October of 2025. With the addition of this equipment, SSV is now equipped to meet 2028 EtO emission standards [two years early].”

The statement appears to refer to a dry bed reactor, which breaks down trace ethylene oxide, that SSV started operating that month. But just six months prior, when the company requested the presidential exemption, SSV said in reference to the new ethylene oxide rules that “the technology necessary to implement the standards is not available,” according to a copy of an email obtained by Hunterbrook.

Emissions data that SSV submitted to the EPA’s toxics release inventory shows that while the company has reduced ethylene oxide emissions from its stacks, fugitive releases have increased rapidly, and the facility’s total emissions in 2024 — the latest available data — were higher than they were in 2020.

Fugitive emissions are the industry term for leaks that escape through valves, cracked seals, and loose connectors rather than being channeled through controlled smokestacks or vents.

The latest emissions data for 2024 also shows that SSV was the fifth-largest ethylene oxide emitter in the entire U.S., ahead of large industrial facilities like BASF’s plant in Geismar, Louisiana., and Eastman Chemical’s site in Longview, Texas. According to the EPA data, SSV’s facility has the highest ethylene oxide emissions of all medical sterilizers in the country.

The EPA had flagged SSV in 2022 as one of 23 medical sterilizers nationally that emitted potentially dangerous levels of ethylene oxide. At the time, the agency estimated that the lifetime cancer risk in residential areas near the facility was 100 in a million. That means if 1 million people were exposed to the level of EtO in the air near SSV 24 hours a day for 70 years, at least 100 people would be expected to develop cancer from that exposure.

At a town hall meeting in 2023, the EPA sought to alleviate local residents’ worries about their cancer risk. SSV had “recently installed new controls that have dramatically reduced those emissions,” according to a Henrico Citizen report at the time.

When asked about the current fugitive emissions at SSV, a Virginia DEQ spokesperson told Hunterbrook that the higher emission numbers are “due to calculation differences” and are “not reflective of an ‘increase’ in fugitive emissions.”

When Hunterbrook followed up and asked what those calculation differences are, the DEQ said that the increased fugitive emissions are due to a misunderstanding on SSV’s part on how to report these emissions. The company had since “rectified their emissions calculation process,” a DEQ spokesperson said.

As early as 2019, Sierra Club’s Virginia chapter had pointed to SSV as one of the state’s major emitters of hazardous pollutants. Its report, “Air Toxins and Health Risk in Virginia,” showed that the Henrico facility had the highest Risk-Screening Environmental Indicators (“RSEI”) score in the entire state. RSEI is an EPA metric that estimates the relative potential human health risk from toxic chemical releases based on the quantity released, chemical toxicity, and population exposed. According to the Sierra Club report, the potential health risk associated with SSV’s facility was 10,000 times higher than the potential risk of the entire state of Vermont at the time.

The SSV facility opened in 1990 and “occupies 76,000 square feet of processing and warehouse space,” according to the company’s website. Sterilization Services also operates a second facility in Atlanta, Ga. Its third facility, Sterilization Services of Tennessee in South Memphis, closed in 2024 after persistent community activism against its EtO emissions.

Regulatory Rollback

The April roof leak at SSV shows that while emissions controls can reduce ethylene oxide emissions in daily operations at medical sterilizers, the risk of a large accidental release of the hazardous pollutant persists.

And now the EPA aims to roll back several Biden-era safeguards against ethylene oxide emissions that are already in place.

When the agency announced these regulations in 2024, it said they would eliminate over 90% of ethylene oxide emissions from commercial sterilizer facilities and reduce the number of people exposed to cancer risks from ethylene oxide by 92%.

In a March announcement, the agency struck a different tone: “EtO is the only safe and effective sterilization method available for many medical devices,” the agency wrote. “EPA is concerned that the current Biden-era EtO emission standards actively threaten facilities’ ability to sterilize equipment and jeopardize one of America’s only options for a secure domestic supply chain of essential medical equipment.”

Data cited by the U.S. FDA shows that approximately 50% of all sterile medical devices in the U.S. are sterilized with ethylene oxide. Other treatment methods include steaming and radiation.

The EPA’s legal argument for rescinding the new rules is that the Clean Air Act prevents the agency from conducting more than one risk review. Since the EPA had already completed a review for ethylene oxide in 2006, argues the agency, the second risk review the Biden EPA conducted in 2024 should not have been completed.

“What the current administration is arguing is, you don’t have the authority to do that. You get one shot at the apple, and it doesn’t matter how much more information science provides you after you’ve regulated,” said Goffman, who worked for the EPA under former Presidents Barack Obama and Joe Biden. “We can’t let these guys win on the absurd notion that Congress meant for the agency to remain ignorant while the rest of the world is increasing its understanding of human health effects of certain chemicals.”

Among other things, the EPA is planning to change the requirement to use continuous real-time emission monitoring systems. Under the proposed change, the EPA will give sterilizers the choice between installing emissions monitoring systems or annual performance testing and parametric monitoring, where key indicators of system performance are measured instead of actual emissions.

Louisa Dickison already submitted her comment on the proposed new rules.

“It’s just appalling and unfathomable to support anything other than basic community awareness and protection,” she told Hunterbrook. “What is the EPA’s job if not to protect the environment, and the environment includes the people who live in it.”

The EPA did not respond to a request for comment in time for publication.

Authors

Till Daldrup joined Hunterbrook from The Wall Street Journal, where he focused on open-source investigations and content verification. In 2023, he was part of a team of reporters who won a Gerald Loeb Award for an investigation that revealed how Russia is stealing grain from occupied parts of Ukraine. He has an M.A. in Journalism from New York University and a B.S. in Social Sciences from University of Cologne. He’s also an alum of the Cologne School of Journalism (Kölner Journalistenschule). Till is based in New York.

Evan Comen is currently the senior data editor at U.S. News & World Report, where he focuses on government rankings and accountability reporting. He has worked as a data journalist since 2015, covering climate change, urban economics, and public policy. Evan has a B.A. in economics from the University of North Carolina at Chapel Hill and is based in New York.

editor

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a B.A. in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life. Sam is based in New York.

Graphic

Dan DeLorenzo is a creative director with 25 years reporting news through visuals. Since first joining a newsroom graphics department in 2001, he has built teams at Bloomberg News, Bridgewater Associates, and the United Nations, and published groundbreaking visual journalism at The Wall Street Journal, Associated Press, The New York Times, and Business Insider. A passion for the craft has landed him at the helm of newsroom teams, on the ground in humanitarian emergencies, and at the epicenter of the world’s largest hedge fund. He runs DGFX Studio, a creative agency serving top organizations in media, finance, and civil society with data visualization, cartography, and strategic visual intelligence. He moonlights as a professional sailor working toward a USCG captain’s license and is a certified Pilates instructor.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please email ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work, or press@hntrbrk.com for media inquiries.

LEGAL DISCLAIMER

© 2026 by Hunterbrook Media LLC. When using this website, you acknowledge and accept that such usage is solely at your own discretion and risk. Hunterbrook Media LLC, along with any associated entities, shall not be held responsible for any direct or indirect damages resulting from the use of information provided in any Hunterbrook publications. It is crucial for you to conduct your own research and seek advice from qualified financial, legal, and tax professionals before making any investment decisions based on information obtained from Hunterbrook Media LLC. The content provided by Hunterbrook Media LLC does not constitute an offer to sell, nor a solicitation of an offer to purchase any securities. Furthermore, no securities shall be offered or sold in any jurisdiction where such activities would be contrary to the local securities laws.

Hunterbrook Media LLC is not a registered investment advisor in the United States or any other jurisdiction. We strive to ensure the accuracy and reliability of the information provided, drawing on sources believed to be trustworthy. Nevertheless, this information is provided “as is” without any guarantee of accuracy, timeliness, completeness, or usefulness for any particular purpose. Hunterbrook Media LLC does not guarantee the results obtained from the use of this information. All information presented are opinions based on our analyses and are subject to change without notice, and there is no commitment from Hunterbrook Media LLC to revise or update any information or opinions contained in any report or publication contained on this website. The above content, including all information and opinions presented, is intended solely for educational and information purposes only. Hunterbrook Media LLC authorizes the redistribution of these materials, in whole or in part, provided that such redistribution is for non-commercial, informational purposes only. Redistribution must include this notice and must not alter the materials. Any commercial use, alteration, or other forms of misuse of these materials are strictly prohibited without the express written approval of Hunterbrook Media LLC. Unauthorized use, alteration, or misuse of these materials may result in legal action to enforce our rights, including but not limited to seeking injunctive relief, damages, and any other remedies available under the law.

By: Jenny Ahn, Till Daldrup, Blake Spendley

Editor: Sam Koppelman

Based on Hunterbrook Media’s reporting, Hunterbrook Capital is short $CSG.AS and long a basket of comparable securities at the time of publication. Positions may change at any time. See full disclosures on our website.

• In the largest European military IPO in history, Czechoslovak Group (CSG.AS) pitched investors a chance to buy the next Rheinmetall, riding the continent’s recent rearmament boom. Hunterbrook Media’s investigation — drawing from statutory filings, subsidiary accounts, satellite imagery, and a range of other sources — suggests investors bought something very different: an arms-dealer marking up old ammunition, with a critical subsidiary under NATO suspension, production numbers that don’t add up, and a major minority owner with “extraordinary rights” holding a sword of Damocles over the company’s balance sheet.

• The story began to fall apart almost immediately after the IPO. In January 2026, CSG raised 3.8 billion euros, with BlackRock and Qatar’s sovereign wealth fund anchoring the deal. 33-year-old owner Michal Strnad cashed out 2.55 billion euros. By February, the nonprofit Ján Kuciak Investigative Center reported that the record 58 billion euro Slovak ammunition framework deal — which CSG highlighted as a growth catalyst during the IPO process — had not been formally joined by any of the eight countries Slovakia claimed were interested. A month later, another nonprofit investigative journalism outlet Follow the Money reported that CSG’s Spanish ammunition factory, which produces essential propellant, had been suspended by NATO’s procurement agency over alleged “sanctionable practices.” Then, a month after that: Another outlet, Seznam Zprávy, reported that Petr Kratochvíl — a minority shareholder with “extraordinary” rights over CSG’s most important subsidiary — had exercised a put option days before the IPO and was demanding 1.4 billion euros. None of this was clearly or comprehensively disclosed in the prospectus.

• CSG’s prospectus positions it as a rival to Rheinmetall, but Hunterbrook’s analysis suggests the vast majority of its ammunition revenue comes not from making shells but from reselling them. Ammunition was two-thirds of the company’s revenue last year and the primary driver of its guided margin increase. The prospectus claims a current capacity of roughly 630,000 large-caliber rounds a year and says 80% of CSG’s production is 155 mm ammunition, the NATO-standard artillery most in demand. Read together, those two figures suggest CSG is producing roughly half a million 155 mm rounds a year in-house — putting it in the same ballpark as Rheinmetall. But “production” is not the same as “production capacity,” and CSG may be exploiting the ambiguity. When Hunterbrook asked CSG to clarify whether it really could produce around 500,000 155 mm rounds, the company refused to answer — saying it does not disclose capacity by ammunition type.

• Hunterbrook’s own reconstruction of CSG’s production footprint points to most of its revenue coming from recommissioning. We could identify only one facility, the Dubnica plant, that appears capable of final assembly of 155 mm rounds; its estimated output last year was between 100,000 and 280,000 rounds. The combined revenue of all four ammunition-producing subsidiaries we identified totaled no more than an estimated 524 million euros in 2024 — roughly a fifth of the 2.5 billion euros CSG reported in medium- and large-caliber ammunition sales that year. The rest likely came from re-selling: acquiring ammunition from third parties, refurbishing it, and reselling it at a markup. CSG has since invested in new production lines — but its total factory upgrades of roughly 205 million euros appear to amount to a fraction of what Rheinmetall has invested in capacity expansion so far.

• The reselling model depends on a global stockpile that may be running out. CSG’s founder once described the core trade bluntly: “You buy one warhead for CZK50 and immediately sell it abroad for CZK150 or more.” It’s a good trade — when there is supply. But CSG admits it has “limited visibility” on remaining stock available for recommissioning. A Reuters investigation put the global market of available large-caliber ammunition at roughly two million rounds as of 2024 — a number Ukraine could burn through imminently. And a key pipeline for lucrative ammunition sales — the so-called “Czech ammunition initiative” — may be losing political support and funding. The new pro-Russia Czech prime minister Andrej Babiš, elected last year, is halting the country’s funding for the program, which procures ammunition through intermediaries like CSG. Other key members like Germany, the Netherlands, and Denmark, are also drawing back support. During his campaign, Babiš said “he was uncomfortable with individuals earning excessive profits from the war,” according to the publication Liga. One document obtained by RFE/RL illustrates that point: CSG was selling ammunition to the Czech government at a 28% markup over similar shells a Turkish company was offering. CSG denies profiteering.

• The minority shareholder seeking 1.4 billion euros for his stake has veto rights over the entity where much of CSG’s cash and trading activity actually lives. CSG is disputing Petr Kratochvíl’s asking price, offering just a tenth of that, but Kratochvíl, the former head of Excalibur Army, owns 10% of CSG Land Systems — the holding company above EA — and holds extraordinary blocking rights over key corporate decisions. EA reported 2.6 billion euros in revenue — nearly two-thirds of the group’s total — and held roughly 575 million euros in cash in 2024. He also has an 8.9% stake in MSM Group, the ammunition parent. The prospectus did not name Kratochvíl or disclose his exercise of the put option. Asked why, CSG told Hunterbrook that its outside legal counsel confirmed Kratochvíl did not effectively exercise this right. Hunterbrook could not reach Kratochvíl for comment, but he has publicly claimed he exercised the right both digitally and in-person.

• Kratochvíl appears to be part of a broader pattern of undisclosed or under-disclosed insiders around CSG’s core subsidiaries and business practices. Before the IPO, CSG transferred 20 to 30 subsidiaries to a vehicle personally owned by Michal Strnad. The IPO described the disposal but did not name Strnad as the recipient. 275 million euros in receivables from those deals remain uncollected. Separately, Excalibur Army disclosed a roughly 4.7 million euro receivable principally from Jaroslav Strnad, the founder and CEO’s father, while also writing off more than 13 million euros worth of time-barred receivables. CSG told Hunterbrook the receivables “will be fully settled in cash” and dismissed the write-off at Excalibur Army as an accounting necessity rather than an actual loss.

• Some of the money pooling may be making its way from CSG insiders to political partners: CSG, for instance, appears to pay rent to a former vice-chairman’s real estate company. That former vice-chairman, Miroslav Dorňák, also controls FinGood, a crowdfunding platform that Seznam Zprávy reported paid millions to the law firm of Robert Kaliňák — the Slovak defense minister behind the 58 billion euro ZVS announcement. CSG told Hunterbrook its payments to Dorňák reflect a “standard landlord–tenant relationship.”

• CSG’s history makes these post-IPO findings less surprising. Jaroslav Strnad built the company by buying, refurbishing, and reselling liquidated Soviet-era military assets. Czech media have tied early surplus deals to family connections inside the Czech defense ministry. Strnad was a major donor to former President Miloš Zeman, accounting for two-thirds of Zeman’s 2018 campaign donations, according to nonprofit investigative journalism group OCCRP, and other outlets have flagged CSG’s contracts and other deals with the government during Zeman’s tenure as irregular.

• Before the Ukraine war, CSG was known for its close ties to Russia and Russian influence networks. JD Vance, now U.S. vice president, wrote to the Treasury Department in 2024 urging the U.S. government to block CSG’s acquisition of Vista Outdoor’s ammunition business, calling CSG “Kremlin-linked” and citing alleged ties to Putin’s inner circle. In its email to Hunterbrook, CSG denied Russian financing allegations and said those relationships ended years ago. But for a company whose valuation rests on selling ammunition to NATO and Ukraine, any residual ties may be meaningful.

• CSG’s performance appears to depend on temporary conditions amid little scrutiny: a wartime shortage, a sufficient supply of old ammunition to refurbish, captive procurement channels, and political tolerance for middleman margins. But the old ammunition stock is shrinking. The Czech initiative is facing political and funding pressure. The Slovak framework may never be more than an idea. Key subsidiary FMG is suspended by NATO. CSG barely converted its 2025 profit into operating cash. And the company is surrounded by unnamed shareholders, related-party vehicles, historical patronage networks, and unresolved legal and reputational problems. If the wartime premium fades before CSG becomes the manufacturer it claims already to be, investors may be left not with the next Rheinmetall, but with a levered, opaque defense conglomerate whose core skill was never mass-producing ammunition — it was finding old ammunition, navigating political systems, extracting wartime margins, and keeping the messy parts out of the consolidated story.

• In response to Hunterbrook’s questions, CSG denied wrongdoing across all areas of inquiry. CSG confirmed its in-house capacity at “more than 600,000 rounds” of medium- and large-caliber ammunition per year, but declined to break it down by type or facility, citing standard industry practice, even after its own prospectus disclosed that 80% of production was 155 mm. The company called its FMG NATO suspension “a temporary and procedural measure” resulting from an internal NSPA investigation into one of the agency’s officials, and said it has had “no material impact.” On the Kratochvíl put option, CSG said outside counsel confirmed Kratochvíl “did not effectively exercise his right” before the IPO, and that auditors found no liability. CSG described the pre-IPO transfer of subsidiaries to Strnad’s Ytara SPV as “standard” restructuring and said all 275 million euros in receivables “will be fully settled in cash”; asked why Strnad was not named in the prospectus as Ytara’s owner, the company said the information is publicly available in the Czech Commercial Register. On the 58 billion euro Slovak deal, CSG emphasized it is a framework agreement with “maximum potential value, not committed orders,” and said it “is not dependent on any single EU funding mechanism.” CSG confirmed that Marián Goga, who faces criminal charges for bribery in Slovakia, “currently serves on the supervisory board of MSM Group” — a fact the prospectus omitted — and said he “has played a positive role in the development of the business.” In addition to CSG denying any wrongdoing across all areas of inquiry, CSG also repeatedly suggested that Hunterbrook’s questions were based on “incomplete information” or did “not fully reflect the underlying facts,” said the IPO process “involved some of the world’s leading financial institutions and law firms” and that it is “inconceivable that any relevant information would not have been properly disclosed.”

• If you know more about CSG, including its potential ties to Russia, please reach out at ideas@hntrbrk.com.

Russia’s invasion of Ukraine may have been the best thing that ever happened to the Czechoslovak Group (CSG).

Before February 2022, CSG was a midsized Czech arms conglomerate. Founded in the mid-1990s as a scrap dealer that refurbished liquidated Soviet-era assets, by the early 2020s, the group had built a small arms empire assembled through aggressive acquisitions of Eastern bloc factories. On the eve of the Russian war on Ukraine, CSG stood at about 580 million euros in revenue with around 3,700 employees.

In just four years, CSG’s reported revenue had increased over tenfold to 6.74 billion euros. The employee headcount nearly quadrupled. CSG was one of the few commercial suppliers in Europe capable of overhauling and delivering Soviet-standard tanks, infantry fighting vehicles, and spare parts that Ukrainian crews were already trained to operate.

More importantly, the invasion gave new life to CSG’s artillery ammunition business. Ukraine was burning through artillery ammunition faster than NATO could produce it, and ramping up production became a top priority for alliance countries.

Deliveries to Ukraine hit 42% of sales in 2024, CSG reported. The rest of the sales mainly went to NATO governments scrambling to arm Ukraine and replenish their depleted stockpiles. In 2025, CSG attributed nearly two-thirds of its revenue, or about 4.1 billion euros, to medium- and large-caliber ammunition sales — an extraordinary figure considering Europe’s leading defense supplier, Germany-based Rheinmetall, reported just 3.5 billion euros in revenue for its combined weapons and ammunition segment.

By late 2025, the company was ready to cash in. A syndicate of eight banks — with J.P. Morgan, Morgan Stanley, and Deutsche Bank among the most recognizable names — signed on as coordinators and bookrunners. They produced a 728-page prospectus, approved by the Dutch Authority for the Financial Markets, a financial regulator. BlackRock, Qatar’s sovereign wealth fund, and Artisan Partners each anchored 300 million euros.

Together, these groups shepherded CSG through a 25 billion euro listing on Euronext Amsterdam in January 2026 — the “world’s largest defence IPO ever recorded,” according to the press release. The story resonated: Missed Rheinmetall? Don’t sweat it. There was a new, publicly traded way to get long the militarization of Europe.

Investors piled in — $57 billion in orders, reportedly 14 times oversubscribed. Shares soared 31% on day one. The company raised 3.8 billion euros. Michal Strnad, the 33-year-old who inherited the arms empire from his father, cashed out 2.55 billion euros in the offering, securing his place as the richest man in the Czech Republic.

But within weeks of the listing, a series of revelations began laying bare what the prospectus — and those eight banks — missed.

In February, journalists from Czech outlet the Ján Kuciak Investigative Center revealed that a 58 billion euro ammunition contract with Slovakia — announced weeks before the IPO and cited as a growth catalyst — appeared to be more bark than bite: None of the eight countries Slovakia claimed would participate confirmed plans to join. Another watchdog, Follow the Money, then reported that CSG’s key Spanish ammunition factory had been suspended by NATO’s procurement agency six months before the listing.

Then, another bombshell: Czech investigative news outlet Seznam Zprávy reported that a disgruntled minority shareholder with extraordinary blocking rights had demanded a 1.4 billion euro buyout just days before the IPO.

None of that was clearly or comprehensively disclosed in the prospectus. In fact, CSG apparently considered disclosing the date of Kratochvíl’s request in its March annual report but later deleted it: Seznam Zprávy reported that it had discovered the old language in invisible ink, which CSG claimed was due to a software glitch. (Side note: In 2024, CSG CEO Strnad pressured the owner of Seznam to sell his media business — threatening “ruinous fines” from Czech authorities if he didn’t comply, according to Czech news outlet Respekt.1)

Notably, the date that CSG considered adding was January 24, 2026, four days after Kratochvíl claims he exercised his right. The difference matters a lot: The IPO was on January 23, meaning CSG still had time to disclose Kratochvíl’s put option to investors — but chose not to do so. In a comment, CSG says this was because Kratochvíl exercised the option improperly.

Hunterbrook Media’s investigation — based on a review of subsidiary filings across the Czech Republic, Slovakia, and Spain buried in CSG’s consolidated numbers — suggests the prospectus omissions go well beyond what’s already surfaced. What we found challenges not just CSG’s governance but its fundamental business model.

Underneath the prospectus calling CSG “a leading defence group” and “a top two European player” in ammunition, and the press releases touting “state-of-the-art” filling lines and “one of the most modern workplaces within Europe,” we found a hodgepodge of Soviet-era factories, a history of political patronage, and widespread reselling of old ammunition.

CSG admits in its prospectus that a portion of its ammunition production comes from “recommissioning” — lower quality ammunition like expired inventory it acquires, upgrades, and returns to the field. It doesn’t explain, however, what proportion of its total sales come from this approach. Hunterbrook’s investigation suggests it has been the vast majority, with CSG’s in-house manufacturing capacity responsible for a fraction of total output. CSG calls recommissioning a “nimble and entrepreneurial” approach — but later admits “limited visibility” on the global stock of ammunition to be resold.

CSG has promised to lessen its reliance on outside supply by vertically integrating the ammunition supply chain, with a goal of achieving production of 1.1 million large-caliber rounds by 2028, putting the upstart ammo dealer on a par with Rheinmetall’s multibillion euro production machine. But the gap between that promise and today’s reality is vast, our findings show — and it likely requires significantly more investment than CSG has made so far.

It’s an investment CSG may not have the cash to embark on: While CSG reported 1.6 billion euros in operating profit in 2025, it converted just 3.8% of that to operating cash flow. And the company sat on 3 billion euros in net debt as of the end of last year — nearly twice its operating profit.

CSG appears to be trying to obscure these facts by adorning its growth narrative with big promises and flashy announcements — while important details about its business are left out of the public record. But the numbers exist, across primary source and subsidiary-level documents, and they reveal a central insight: CSG is still running its business like a post-Soviet era conglomerate in the shadow-world of Eastern European defense markets, where it could brush off public scrutiny over questionable practices.

Hunterbrook found other examples of questionable ways CSG is still doing business — from cash disappearing into Strnad’s orbits, to a former minority shareholder and key operator of the company now facing criminal charges for corruption. None of these are in the prospectus or in the annual consolidated statements.

But CSG is now a publicly listed company on a global exchange, backed by some of the world’s biggest investment funds and with obligations to public shareholders. The practices that built the empire will face a very different level of scrutiny from regulators, investors, and journalists than the company may have grown accustomed to.

Hunterbrook is committed to providing that scrutiny. The following represents just some of what we have found in a matter of months. The reporting continues. Reach out at ideas@hntrbrk.com if you know more.

Can CSG Actually Make the Shells It Is Promising?

It would be the biggest deal in CSG’s history. And it was disclosed in December 2025, just weeks before the company’s IPO.

The announcement: ZVS Holding, a 50/50 joint venture between CSG and the Slovak government, had signed a contract with Slovakia’s defense ministry to provide up to 58 billion euros worth of medium- and large-caliber ammunition over the next seven years. The deal is not a firm purchase order but a framework agreement, meaning it sets the terms under which orders could be placed.

Slovakia, which is undergoing budget cuts in order to save 2.7 billion euros, assured the public that the deal wasn’t just for them. Slovak Defense Minister Robert Kaliňák claimed eight countries wanted to join: Croatia, Greece, Romania, Italy, Poland, the Czech Republic, Belgium, and the Netherlands. “We assume that specific contracts will be concluded within two to three months, and deliveries will start next year,” Kaliňák said in an interview with Slovak newspaper Pravda in December 2025.

It turned out the announcement may have been more hype than substance. None of the countries Kaliňák said would join the deal actually confirmed any intention to join. Slovak investigative news outlet ICJK, in cooperation with other journalists, contacted every named country, and while one indicated the proposal was still under consideration, others were outright dismissive of Kaliňák’s claims. “This is not currently relevant for the Netherlands,” the country told ICJK. CSG’s home country of the Czech Republic went a step further, blocking any consideration of the deal after determining it was akin to a no-bid contract, ICJK reported.

The participation of other countries is crucial for Slovakia to get special 1% financing through the EU’s flagship 150 billion euro Security Action for Europe program, which is possible only if at least two members participate. The exemption allowing single-country participation expires at the end of May 2026. If Kaliňák doesn’t secure a partner by then, low-cost EU financing for the ammunition purchases may become harder.

In an email to Hunterbrook, CSG emphasized the deal is a framework agreement with a “maximum potential value, not committed orders,” and that the deal is not dependent on any single EU funding mechanism. The company added, “serious discussions are ongoing with several potential customers” but declined to name them, citing commercial confidentiality.

But the eye-popping 58 billion euro figure drew attention to a more fundamental question: Even if the contract does convert, is CSG physically able to make the shells it’s promising?

CSG told Bloomberg in an email that the figure “reflects the maximum potential volume of deliveries over the seven-year period,” estimated based on the “total value of available production capacity.” Kaliňák vouched for the company’s ability to deliver on the deal, adding that the deal is based on what can be produced in three shifts. The company recently inaugurated a new filling line at its Dubnica nad Váhom plant that it claimed would help fulfill the Slovak deal and reach its production target of a million large-caliber rounds per year.

But CSG and ZVS allegedly dodged questions from the ICJK about the exact production capacities, citing “security and competition reasons.” (In contrast, Rheinmetall, CSG’s larger competitor, has been more explicit about its current and projected production capacity and timeline. See its March 2026 Investor Presentation, page 34, and its 2025 Annual Report, page 51)

Ambiguity grew when CSG announced that “operating conditions allow for a two-shift mode” at the newly updated plant — seemingly at odds with Kaliňák’s comment that the target production is achievable through a three-shift operation. A defense ministry spokesperson responded to an ICJK question on the discrepancy by accusing the outlet of having “fundamentally incorrect information” as before, and offering a vague rebuttal: “crucial components can also be produced in three-shift operation.”

Even with three shifts, however, it’s unclear CSG could produce anything close to 58 billion euros worth of ammunition.

In fact, it’s unclear how much CSG is producing at all. Or what proportion of CSG’s claimed 4.1 billion euros in revenue from M/L ammunition sales is coming from real in-house manufacturing.

Beyond the 58 billion deal, medium- and large-caliber ammunition is central to the group’s growth thesis, with the company arguing demand will continue to climb even after the war in Ukraine ends, driven by NATO’s stockpile refill requirements. It was the group’s “largest revenue driver,” contributing 61% of total revenues in 2025, according to the company. CSG reported a nearly 7 billion euro backlog on M/L caliber ammunition sales last year (and 15 billion euros across all segments), with an additional 27 billion euros in the pipeline for the whole group — including about 1 billion euros from the recent Slovak deal.

Hunterbrook’s investigation, however, raises fundamental questions about CSG’s production capacity — and how much the company can actually cash in on this opportunity.

Demystifying CSG’s Ammunition Production Scale

To start, it’s very hard to even understand precisely what CSG is claiming regarding its capacity to produce ammunition.

In one place in the prospectus, CSG says it can make 630,000 rounds; in another, 550,000 rounds. In an email to Hunterbrook, CSG affirmed it had “more than 600,000” of capacity.

More confusing is what those numbers represent.

In some places, including page 109 of its prospectus, CSG says this total refers just to large-caliber ammunition. In its email to Hunterbrook, CSG said it covered both medium- and large-caliber ammunition, but also, in that same email, CSG’s spokesperson directed Hunterbrook to look at page 109.

On page 109 of the prospectus, CSG also says it plans to increase its production to 1.1 million large-caliber munitions, substantially, by the end of 2028. If true, those figures would put it on a par with its much larger peer Rheinmetall, whose current production capacity and near-term goals are just slightly ahead of CSG’s.

The apparent discrepancy in CSG’s numbers may be small, but the precise definition of what these numbers represent is critical. 630,000 large-caliber rounds is a very different proposition than 550,000 medium- and large-caliber rounds combined — if you’re trying to understand CSG’s true ammunition production capacity.

Large-caliber rounds, especially 155 mm artillery rounds, are responsible for much of the company’s narrative; they’re the workhorse of Ukraine’s fight against Russia, the NATO-standard artillery in most critical need; and a big reason Rheinmetall saw its stock price increase more than 20 times after the invasion. An investigation by a consortium of journalists in 2024 put the total Western European artillery output at just 500,000 to 600,000 rounds per year — a fraction of Ukraine’s burn rate of about 2.4 million and the EU’s stated 2 million target. (Watch this YouTube video by The Wall Street Journal on the 155 mm ammunition shortage.)

155 mm rounds appear to go for anywhere between 3,000 and 8,000 euros apiece, reflecting a significant wartime premium; medium-caliber rounds are priced in the low hundreds.2 So the lion’s share of CSG’s revenue, very plausibly, comes from the sale of large-caliber rounds.

And a reader of the prospectus could be forgiven for thinking CSG makes around half a million 155 mm rounds per year — since the company says that 80% of its M/L production is 155 mm; and its total production capacity is around 600,000.

This is an impressive-sounding claim that, if true, makes CSG’s manufacturing footprint almost comparable to Rheinmetall’s.

But that’s far from clear.

Hunterbrook took three approaches to stress-test these claims. In none of them could we find evidence that CSG is producing anything close to the number of 155 mm rounds Rheinmetall is producing in-house.

And all of the approaches raised more questions than answers as to how to explain the roughly 4.1 billion euros CSG reported in M/L ammunition revenue in 2025.

Now, a caveat: Military production can be obfuscated. And we may have missed something — say, a secret, underground propellant manufacturer. Our calculations could also be wrong, and if you have better ideas for how to back into these numbers, please write us at ideas@hntrbrk.com.

But based on what is publicly available, CSG’s in-house production numbers, alone, cannot come close to explaining its rapidly growing revenue.

Method 1: Matching CSG’s Capacity Claim With On-the-Ground Realities

The idea here is to test CSG’s production claims by actually looking at CSG’s production capacity on the ground.

The prospectus makes two key claims: CSG has capacity for roughly 630,000 large-caliber rounds a year, and 80% of its M/L ammunition production is 155 mm. Read together, an investor might naturally conclude CSG is producing roughly half a million 155 mm rounds a year in-house. Eighty percent of 630,000 is 504,000.

But there’s a critical distinction buried in the language. The 630,000 figure refers to “capacity.” The 80% figure refers to “production.” Those aren’t the same thing. If CSG is running below full capacity, actual 155 mm output could be far lower than investors might assume.

Or, CSG might be counting production of components, say shell bodies, rather than fully-assembled rounds, as part of overall production capacity. The spokesperson said in CSG’s email to Hunterbrook that the term “in-house production capacity” is meant to refer “to the Group’s ability not only to carry out final assembly of large-calibre ammunition, but also to manufacture a substantial portion of its key components within the CSG industrial network.3”

CSG appears to be aware of the ambiguity: When Hunterbrook asked the company to confirm whether it can produce around half a million rounds of 155 mm per year, CSG refused, saying it does “not disclose detailed production capacity by specific ammunition types” and that “production capacity is not a fixed or single-dimensional metric.”

The refusal is notable given that CSG’s own prospectus disclosed both figures that produce that math.

So the question is, does CSG have the manufacturing footprint to produce anything close to half a million rounds of 155 mm ammunition in-house?

CSG doesn’t clearly disclose exactly which of its factories make ammunition, much less break down the full quantity by type of ammunition. And as mentioned, information across CSG’s various public statements — press releases, websites, and company disclosures to investors — is often contradictory, sometimes even across pages in the same report.

For example, in the prospectus, the company says there are 14 ammunition factories on one page (page 95), then says there are 12 on another (page 99).

But in the sustainability section of the 2025 annual report, where the company is legally required under EU laws to describe its sector and operations, including aspects of its value chain (pages 124–126), Hunterbrook counted only seven operating entities described as involved in manufacturing ammunition.4 Of those, three don’t seem to make fully assembled artillery ammunition, but rather components for ammunition — like shell casings or explosives — or only make ammunition for small firearms.5

That seemingly leaves only four factories that actually make finished M/L ammunition: the Dubnica factory that CSG co-owns with the Slovak defense ministry; VOP Nováky, a longstanding CSG ammunition factory in Slovakia; Fábrica de Municiones de Granada (FMG), a 700-year-old ammunition factory in Spain, acquired in 2020; and ZVI a.s., a Czech ammunition factory that CSG recently purchased.6

Of those four, Dubnica appears to be the only CSG facility the company has described as capable of producing fully assembled 155 mm rounds. CSG’s three other ammunition-producing plants do not seem to mention such capability: CSG’s website mentions the VOP Nováky plant making tank and mortar rounds, rockets, and ammunition components. It also says it’s involved in the “life cycle extension of ammunition of 57-155 mm calibre” — i.e. refurbishing; an ICJK investigation in 2024 said VOP Nováky only makes 155 mm training rounds, effectively meaning rounds with no explosives.

As for FMG, an article on its website dated November 2025 describes its main production as tank ammunition. It also mentions making mortar ammunition, as well as propellants and explosives — components needed for 155 mm artillery ammunition. The article doesn’t mention making 155 mm ammunition itself. ZVI only makes medium-caliber ammunition.

CSG finished upgrades at Dubnica in late 2025 that it says will allow the factory to produce up to 280,000 rounds in 2026. In 2025, however, total output at Dubnica was likely around 100,000 rounds per year, according to ICJK.

That suggests CSG’s in-house production capacity for 155 mm rounds at Dubnica is somewhere between 100,000 and 280,000.

That’s nowhere close to the half a million rounds investors might infer from the prospectus.

To be sure, in its email to Hunterbrook, CSG denied that Dubnica is the only location where “final assembly of 155mm ammunition takes place,” but declined to identify the other facilities, citing commercial and security reasons. CSG also explained that large-caliber ammunition is a “complex system,” and therefore, it “would not be accurate to attribute production of 155mm ammunition to a single site.”

Which raises another question: Does CSG include “recommissioning” in its production numbers?

CSG explains in its prospectus that one of its methods for producing ammunition is what it calls “recommissioning”: “The Group acquires lower quality large caliber ammunition from NATO member armies (such as expired inventory) and then inspects, upgrades and reassembles inventory for return to the field,” CSG writes.

Just how much recommissioning CSG does — relative to in-house production — is the key question, one the company did not answer directly in response to Hunterbrook’s questions. So we tried to figure it out.

Method 2: Subsidiary Revenue Analysis

To answer that question, Hunterbrook looked at the revenue reported by each of the subsidiaries that we identified as making ammunition to their respective state registries in the Czech Republic, Slovakia, and Spain. The idea is straightforward: If CSG is really manufacturing most of its ammunition in-house, the factories doing the manufacturing should be reporting revenue that, in aggregate, accounts for the bulk of the group’s ammunition sales, after accounting for the margin on final sale.

In its 2024 filing with the Czech registry — the latest available — ZVS reported 119 million euros in revenue, of which 85 million euros were likely from in-house production; the rest was labeled as revenue from goods resold or services. VOP Nováky reported 260 million euros in revenue in 2024, of which about 160 million euros were likely from in-house production. FMG reported 163 million euros in revenue. A portion of that is revenue from components of ammunition, like propellant charges, rather than finished ammunition, but FMG did not break out the revenue by these subitems.

ZVI’s filings with the Czech registry showed it was a loss-making company with 37 employees and revenue of less than half a million euros in 2024. CSG provided a pro forma table showing what the revenues would have looked like if the acquisition had occurred at the beginning of the reporting period, which shows just 15 million euros from several acquisitions clumped together, including ZVI — suggesting CSG’s expected revenue from ZVI in 2026 was a fraction of 15 million euros.7

In total, the combined revenue in 2024 reported by ZVS, VOP Nováky, ZVI, and FMG — net of revenue from components, services, or resold goods where those figures were reported — was no more than 409 million euros, according to a Hunterbrook analysis.

Now, CSG is a complex group with extensive intragroup sales: Factories don’t always sell directly to end customers. Instead, they sometimes sell to trading entities like Excalibur Army, which then resells to governments and militaries at the final market price. That means the revenue reported by the manufacturing subsidiaries may understate the consolidated revenue that in-house production ultimately generates — because the markup to the end customer is booked at the trading entity, not the factory.

To account for that, Hunterbrook applied the estimated 28% operating EBIT margin for the Defence Systems division — a generous assumption in some ways, since it ignores that some factories do sell directly to end customers and their revenue almost certainly already reflects those margins.8 After that addition, you get about 524 million euros for the estimated total revenue in 2024 from ammunition made by its factories. That’s roughly a fifth of the total M/L ammunition revenue of 2.5 billion euros reported by the company for 2024.

Hunterbrook used revenue data from 2024, because that’s the latest year for which subsidiary files were available from the Czech business registry.

Meaning, roughly 80% of CSG’s total ammunition revenue the company reported in 2024 seemingly can’t be accounted for by in-house production, and therefore likely came from third-party sources, according to Hunterbrook’s analysis.

CSG has since made meaningful progress to expand its in-house production capacity, including a new 155 mm filling line at Dubnica that was inaugurated in December 2025. Which brings us to the question: Just how much new capacity could CSG have brought online?

Method 3: Comparing CSG to Rheinmetall’s Manufacturing Footprint

This approach is premised on the assumption that if CSG can really produce around as much ammunition as Rheinmetall, then its investment in its manufacturing capacity should also roughly mirror Rheinmetall’s.

CSG appears like it actually had a bit of a head start. CSG said it could make less than 200,000 rounds a year in 2022; Rheinmetall says its numbers were about 130,000 (based on the company’s chart showing 70,000 155 mm rounds and 60,000 tank rounds).

Across the four existing CSG ammunition-producing plants Hunterbrook identified, CSG has since reported the completion of improvements costing a total of around 205 million euros: installing a new filling line and a new shell line at its ZVS plants, and improving automation at VOP Nováky. In 2024, CSG’s Defence division CEO mentioned “big plans” for significant investments in FMG, but it’s unclear what the improvements were or how much it would cost. CSG has also announced plans to invest in “extensive modernization and expansion of ZVI’s production.” But details on the plan are unclear.

Compare that to the nearly 500 million euros Rheinmetall spent on a greenfield ammunition plant in Germany completed last year alone, which is expected to make 350,000 155 mm shells per year by 2027 after a full ramp-up.

That’s one site. Rheinmetall also runs a Spanish firm it acquired for 1.2 billion euros in 2023, which analysts say added roughly 300,000 rounds per year. Then there is an additional retrofitted Berlin auto plant where more than 200 workers have been shifted from automotive pumps to forging 155 mm casings — plus new plants under construction in Romania, projects in Lithuania and the U.K., and expanded capacity in Hungary, South Africa, and Australia.

CSG and Rheinmetall are targeting similar production ramp-ups on similar timelines: In its prospectus, CSG compares its target to “substantially” achieve 1.1 million medium- and large-caliber production by the end of 2028 with Rheinmetall’s target to reach the same goal by 2027. But again, CSG appears to be blurring important facts.

Reading the fine print, CSG seems to be comparing its own 1.1 million medium- and large-caliber ammunition target with Rheinmetall’s 1.1 million 155 mm-specific target. According to Rheinmetall’s disclosures, the company is actually targeting around a total of 4.5 million rounds, including medium- and other large-caliber ammunition.

Moreover, CSG hasn’t explained exactly where the ammunition is currently coming from, or how or when it plans to nearly double production. When asked, CSG argued: “We do not disclose detailed production capacity by specific ammunition types. This is standard practice in the defence industry, and such granular data is not publicly provided by manufacturers.”

Instead, CSG offers a chart without precise labels, scale, or timeline details to suggest roughly half of its revenue is in-house currently, a number that will presumably grow to become the vast majority of revenue by an unspecified “mid-term” time horizon.

Achieving full in-house production requires vertically integrating manufacturing capacities for each of the components of a round. A complete 155 mm artillery round has four main components: the shell body, the explosive fill (typically TNT), a fuse, and a propellant charge; the propellant charge often relies on nitrocellulose as a precursor.

Of the components, TNT and propellants are the most constrained input in European ammunition manufacturing, according to industry experts. Rheinmetall’s CEO has repeatedly called propellant production “a strategic bottleneck” in the defense industry. CSG itself has acknowledged this, saying “the availability of such propellant charge systems is currently one of the main limiting factors in increasing artillery ammunition production capacity in Europe.”

Both companies have publicly committed to addressing the propellant and explosives bottlenecks by bringing the capabilities in house. CSG is guiding to flat margins this year, but increased margins in the midterm as the “benefits of vertical integration and production capacity-ramp up” kick in.

In March, CSG announced plans to invest 300 million euros in a joint venture with European propellant manufacturer Eurenco to build a new propellant plant in Slovakia. It also purchased a nitrocellulose plant in Walsrode, Germany, last year, as part of a 141 million euro acquisition9 and invested 50 million euros in a joint venture in Greece to restart TNT production.10

But again, the scale of CSG’s investment pales in comparison to its competitor, Rheinmetall. Rheinmetall announced in November that it is planning to invest 535 million euros in building a new nitrocellulose plant in Romania — nearly four times what CSG spent on Walsrode. Rheinmetall already has four other nitrocellulose sites globally. Its German plant is supposed to produce the full value chain, according to a 2024 press release — from projectile and fuse to explosive charge and propellant charge.

CSG and Rheinmetall’s total capital expenditures in 2024 and 2025 also reflect that gap, with Rheinmetall’s capex at nearly four times CSG’s in 2025. CSG appears to be gearing up to play catch-up, guiding to nearly triple the 2025 capex intensity in the next year.

To be clear, capex comparisons are imperfect. Rheinmetall’s higher spending might reflect predominantly other segments, as well as variables like the relatively high cost of Western European labor compared to Eastern European labor (as CSG pointed out in its comment to Hunterbrook). In other words, CSG could theoretically be getting more output per euro of investment, and it certainly could have benefited from the head start of inheriting Soviet-era factories.

But the gap — between CSG’s 205 million euros in total upgrades across four plants, plus a nitrocellulose acquisition and two joint ventures not yet operational, and Rheinmetall’s investments of billions of euros so far to expand ammunition production — implies it would be hard for CSG to catch up.

And while CSG does plan to increase capex massively, it would be with cash that CSG may not have.

In 2025, the company reported just 61 million euros in operating cash flow, despite 1.6 billion euros in operating EBIT — a 3.8% conversion rate. The entire cash from operating profit was wiped out by its working capital totaling 1.6 billion euros, up to 24% of revenue from 13% the year before. The company said it “deliberately” increased the working capital to fulfill “record order backlogs amid tight supply chain constraints and strong order inflows.”

That means, unless CSG can manage to materially reduce its working capital, funding a 638 million euro capex will almost certainly require outside capital or massive upfront payments; CSG’s debt already stood at 3 billion euros as of the end of 2025 — nearly double from the prior year. CSG said it expects working capital will stabilize in 2026, even as it highlights a 36% increase in backlog. For comparison, Rheinmetall reported a 66% cash conversion rate in 2025, and guided to at least 40% in 2026.

So, we’re back to our original question. How do we explain the gap between our estimated production revenue for CSG and CSG’s claimed 4.1 billion euros in M/L ammunition sales? Markups beyond the 27% EBITDA of the segment or non-production-related revenue like servicing can only explain a portion of that. The rest is likely coming from recommissioning.

The Big Business: “Buy a Warhead for CZK50… Sell It Abroad for CZK150“

“You buy one warhead for CZK50 and immediately sell it abroad for CZK150 or more,” Jaroslav Strnad explained to news outlet Respekt in 2018. It’s a good pitch!

Recommissioning can indeed be a profitable business; after all, it’s CSG’s founding trade — sourcing from depleted Eastern European stockpiles, refurbishing, and reselling at a markup.

Spain’s transportation minister Óscar Puente posted a document on X showing one example of CSG operating as a middleman for the importation of ammunition from India.

The problem is, there is a finite supply of ammunition to be resold. CSG described the recommissioning method in its prospectus as a “nimble and entrepreneurial approach” that allowed the company to meet urgent demand from the Ukraine war. But it also admitted there is “limited visibility on the remaining stocks of large-caliber ammunition for recommissioning available in the market in the medium-term.”

Countries like the U.S., South Korea, and India, which in the past have supplied 155 mm ammunition to NATO, are facing constraints: The U.S. is woefully behind its replenishment targets, with production ramp-up at less than half its target as of last year. South Korea cannot spare any more 155 mm shells without “risking shortages” given the North Korea threat, the Center for Strategic & International Studies wrote in 2024. India is scaling up production, but the Indian defense ministry was reportedly considering a ban on 155 mm shell exports due to escalating tension with Pakistan as of last year.

A 2024 Reuters investigation cited “a senior Czech official” putting the available global stock of large-caliber ammunition at 2 million rounds — which a research study from that year suggested would not last more than a couple of years.

And sourcing inputs from the outside is inherently risky. In May 2024, CSG CEO Michal Strnad acknowledged publicly that roughly half the components his company was purchasing from suppliers in Africa and Asia were not of sufficient quality to ship directly to Ukraine. “Every week the price is going up and there are big issues with the components,” he told the Financial Times.

An alarming complaint about quality reportedly arrived in the form of a letter from the Ukrainian to the Czech government, the German business newspaper Handelsblatt reported in 2024. “It’s every artilleryman’s nightmare: The shell doesn’t explode kilometers away in the enemy positions, but shortly after leaving the gun barrel. This is exactly what happened to soldiers in Ukraine — with artillery shells that were partly supplied as part of the Czech munitions initiative,” the article reads. The purportedly malfunctioning shells — including some apparently from Excalibur Army — “resulted in injuries to soldiers and damage to artillery systems, ” the Handelsblatt article reported, noting the cause was traced to outdated World War II–era designed detonators; five out of every 10,000 shells fired exploded prematurely.

That’s one premature detonation for every 2,000 rounds fired. For a battery firing hundreds of rounds per day in active combat, that could mean a premature detonation every few days.

Jana Černochová, who was then the Czech minister of defense, challenged the Handelsblatt article, saying any quality issues were rare. “We know that we don’t just buy new ammunition, we also buy older ones that may have potential problems,” she said.

CSG subsidiary Excalibur Army reportedly also acknowledged “minor issues” with shells.

A source close to the Ukrainian Army told Hunterbrook that the attitude among Ukrainian artillery units was that unreliable shells were still better than no shells.

In its email, CSG told Hunterbrook that third-party sourcing “was primarily linked to the initial phase” of the Czech ammunition initiative and that the company is now “predominantly supplying large-calibre ammunition from its own production.” The company offered no data to support that claim.

Production Bottleneck: Bottlenecked

Then there may be a more immediate problem: a potential bottleneck at FMG — casting a shadow over how much the company can actually vertically integrate its ammunition production.

Hunterbrook reviewed CSG’s annual reports and press releases and found no references to existing propellant charge production outside of FMG.11 The Eurenco propellant charge plant, announced earlier this year, won’t be operational until 2028 at the earliest, meaning there’s a two-year gap during which growth appears to be constrained by a single factory.

A single factory that NATO has blacklisted.

In July 2025 — six months before the IPO — NATO’s procurement agency, NSPA, suspended FMG from bidding for new contracts, according to Amsterdam-based watchdog Follow the Money and a consortium of reporters that included the French outlet La Lettre. The suspension had since been extended indefinitely as of March, according to Follow the Money. In an email response to Hunterbrook’s question on NSPA’s ban on FMG, a NATO official said, “The NATO Support and Procurement Agency (NSPA) will not comment on ongoing proceedings concerning the suspension of contractors suspected in fraudulent and corrupt activities related to NATO contracts.”

The company told Follow the Money that the suspension was “unfounded” based on an internal audit. CSG also said in a statement that it was immaterial, given the fact that the “NSPA represents one of many FMG customers” and that FMG can still sell to NATO member states, even if blocked from selling directly to NATO. When asked about the suspension by Hunterbrook, CSG said: “To the best of our knowledge the situation regarding FMG is not related to any wrongdoing by the company, but to an ongoing internal investigation within NSPA concerning one of its officials.”

CSG also characterized the FMG suspension as “a temporary and procedural measure” with “no material impact on the group’s business performance,” and argued that its integrated manufacturing model — in which entities like FMG supply components internally — is “a core strength of our industrial model, not a concentration risk.”

But while NSPA itself may not be a major direct customer for FMG, the suspension at least raises the question of how NATO will treat products sold by other CSG subsidiaries that incorporate FMG’s propellant charges. After all, FMG’s 2024 accounts show 85% of its revenue went to intragroup customers. If NATO’s position is that sales from those entities are also suspended due to the incorporation of FMG products, the effect of the suspension on CSG as a group could be more pronounced.

The Price of Urgency

A separate question for CSG is how much the current revenue reflects the premium the company charges on wartime shortage, and how much longer those conditions will last.

One of the key pipelines for CSG’s delivery to Ukraine, the Czech ammunition initiative, is facing funding shortfalls. Launched in 2024 to pool funding from various Western countries to procure ammunition from around the world through intermediaries like CSG, the initiative had delivered 4.4 million large-caliber rounds to Ukraine as of February, Czech President Petr Pavel told Czech news outlet Odkryto.cz. However, the new Czech Prime Minister Andrej Babiš — notably a far-right populist who has been labeled pro-Russia — has publicly said that despite his commitment to keeping the Czech initiative alive, he will no longer finance it. He also committed to scrutinizing procurement deals and said he “was uncomfortable with individuals earning excessive profits from the war,” according to the publication Liga.

Other key members of the initiative like Germany, the Netherlands, and Denmark are also drawing back support. As of February, the initiative had raised only 1.4 billion euros out of the 5 billion euros targeted for 2026 — according to a senior NATO official who spoke to Reuters.

The initiative has faced numerous criticisms around cost, quality, and delay. Investigative journalists have accused the Czech intermediaries of charging margins at least four times higher than what Ukrainian arms brokers charge for comparable procurement. Critics also questioned why the initiative excludes other major defense suppliers like Rheinmetall and Norway’s Nammo.

Documents obtained by the Radio Free Europe/Radio Liberty investigative unit Schemes, for example, show that in February 2024, CSG subsidiary Excalibur Army offered 155 mm artillery shells to the Czech government at 3,200 euros per unit. According to the investigation, “Around the same time, a Turkish manufacturer offered to sell seemingly similar M107 shells to Excalibur Army for 2,500 euros each” — a potential markup of roughly 30%.

CSG has publicly denied profiteering, calling the accusations “attacks based on half-truths and information taken out of the overall context.”

But the accusations are hardly new or limited to ammunition. In January 2023, the Kyiv Independent reported on a deal in which a broker earned 2 million euros — roughly 30% of the 6.8 million euro contract value — on a sale of 12,500 grenades destined for Ukraine from CSG’s export agency, Excalibur International, to a Dutch intermediary during the hectic days of the early invasion. Multiple European arms dealers told the Kyiv Independent the normal commission is between 5% and 10%.

Moreover, while competitors like Rheinmetall have a large backlog of long-term government contracts, CSG often charges customers the “spot” price for munitions, according to defense investors who spoke with Hunterbrook. In the near-term, this is a boon to margins, as CSG can essentially pick its price — like New York City bodegas selling umbrellas in the rain.

The problem with this business model is that it relies heavily on a continued shortage caused by perpetual conflict.

CSG’s underlying business, meanwhile, offers little margin of safety. Medium- and large-caliber ammunition delivered nearly two-thirds of CSG’s 2025 revenue, and the company’s flat-margin guidance for 2026 depends on that subsegment holding up. Land Systems, a subsegment responsible for 16% of revenue last year, is “expected to expand moderately.” The company expects “low to moderate margin improvement” in the Ammo+, responsible for 21% of revenue last year but saw its adjusted operating EBIT fall 58% year on year on a like-for-like basis on the back of what the company described as weaker commercial ammunition demand, rising input costs, and tariff headwinds.

So, this is the business reality. CSG appears to resemble the Cold War inventory-liquidation business it once was, with a manufacturing side business that seems much smaller than implied. The premium it charges is a wartime premium. The inventory it refurbishes may be running out. Its in-house manufacturer of a critical ammunition component is under indefinite NATO suspension. Its centerpiece growth contract depends on the participation of countries that say they hadn’t joined. And the cash it would need to close the capex gap with Rheinmetall might be cash it can’t generate.

Which brings us back to the IPO and the question that remains: How did CSG sell this story to investors in the first place?

The Operator

Part of the answer, again, may begin with what CSG left out.

Within weeks of the IPO, investigative journalists across Central Europe had identified serious omissions from the prospectus — including a put option exercised by a minority shareholder, Seznam Zprávy reported.

Hunterbrook dug deeper. The findings pointed to a company that appears to be concealing not just individual facts, but deeper aspects of its business — a sprawling network of intercompany transactions that obscure the way money flows and who really controls what.

And it seems to follow a pattern: Major milestones — from its first factory acquisitions to its largest government contracts — have often been accompanied by allegations of political favoritism, questionable business tactics, or conflicts of interest.

Undisclosed “Minority” Shareholders

CSG’s prospectus acknowledges, in generic legal language, that some subsidiaries have minority shareholders whose interests may differ from the company’s. It does not name all of them.

It also does not mention that one of them had already triggered a mechanism to force CSG to buy his stake — three days before the IPO. That shareholder is Petr Kratochvíl, according to a March 19 report from Seznam Zprávy.

Kratochvíl is not a passive investor. He ran Excalibur Army — CSG’s founding entity and most important subsidiary — for nearly 20 years, from 2005 until 2024. Until recently, he was also the chairman of the board of CSG’s Land System, the holding company that sits between CSG Group and Excalibur Army, company filings with the Czech registry show. He built “key parts” of the business alongside the Strnads, he said in an interview, and stood beside them through legal troubles, including a personal prosecution for purchasing anti-personnel mines. (He was later acquitted.)

Kratochvíl wants to sell his 10% stake in CSG Land Systems, he told Seznam Zprávy. He also has an 8.9% stake in MSM Group — another important subsidiary controlling CSG’s ammunition businesses.

On January 20 — the week of the IPO — Kratochvíl exercised a put option forcing CSG to buy his CSG Land Systems stake. His price: 1.4 billion euros, Seznam Zprávy said, citing an interview with Kratochvíl. CSG’s counteroffer: one-tenth of that.

Regardless of whose valuation is more accurate, the dispute is meaningful. While CSG Land Systems itself appears to be primarily a holding company, one of the assets it holds is Excalibur Army. In 2024, Excalibur Army reported 2.6 billion euros in revenue — two-thirds of the entire CSG group’s revenue for the year. Excalibur Army also held nearly 600 million euros in cash at that time.

Moreover, Kratochvil doesn’t just own 10% of the entity sitting atop CSG’s most important subsidiary. He also has “extraordinary rights.” His Class B shares carry four votes each, giving him veto power over changes to capital structure, articles of association, and corporate reorganizations, Kratochvíl told Seznam Zpravy in an interview.12 He also claims to have the right to a guaranteed buyback at market price.

In practical terms: Kratochvíl asserts he can block operational decisions at the entity that appears to control a subsidiary responsible for 578 million euros in cash and two-thirds of CSG’s revenue as of 2024.

The prospectus does not even name Kratochvíl. But if Kratochvíl’s valuation of his stake prevails, that’s a 1.4 billion euro liability that CSG may not have the cash on its balance sheet to pay.

In a March 2026 interview with Seznam Zprávy, Kratochvíl said he was promised there would be no IPO.

CSG told Hunterbrook in an email that the put option exists but that the auditors found “no liability (not even a contingent liability) that would need to be presented” in the annual report. Asked to confirm whether Kratochvíl exercised the put option days before the IPO, CSG replied that outside counsel confirmed Kratochvíl “did not effectively exercise his right regarding the minority stake before the IPO.” According to Seznam Zpravy, Kratochvíl delivered the notification twice on January 20: physically, via a courier to CSG headquarters, as well as digitally.

The omission of the details of Kratochvíl’s exercise of the put option in the prospectus doesn’t appear to be an anomaly. As Hunterbrook dug deeper, other omissions surfaced, revealing a pattern: a series of related-party transactions that seem to move cash to company insiders’ orbit — and sometimes, to their political partners — and a web of affiliated entities and shell companies that seem to play a questionable role in CSG’s acquisition practices.

Hidden Liabilities: Money Leaking to Strnad’s Orbit

Take, for example, the 275 million euros that Strnad’s personal vehicle likely owes CSG for which no evidence has been collected.

Ahead of the IPO, CSG transferred two dozen subsidiaries to Ytara SPV, an entity personally owned by Michal Strnad.13 The prospectus mentioned that non-core assets would be carved out but didn’t name Ytara as the recipient. The 2025 annual report clarifies that: 275 million euros worth of related-party receivables owed by Ytara from a disposal of subsidiaries.

Along with the disposal, 63.3 million euros in cash held by those entities left the group. CSG retrieved just a fraction of that, leaving CSG with negative cash proceeds of 56.9 million euros, the 2025 annual report further reveals.

Ytara SPV has since moved above CSG FIN in the corporate chain, according to CSG’s 2025 annual statement — meaning Strnad now controls the listed entity through a vehicle that’s absorbing assets from it.

Ytara’s articles of association as of December 4, 2025, filed with the Czech registry, give it broad authority, including to provide financial, trade, consulting, IT, and real estate assistance — notable capabilities for a holding company sitting between Strnad and the rest of the group that can facilitate upward cash movement without public disclosure.

In an email to Hunterbrook, CSG described the pre-IPO restructuring as “standard,” explaining the carved-out entities — which included “a Czech manufacturer of railway braking systems” and “an Italian producer of luxury sporting firearms” — were non-core. The company said “all related party transactions (including the 275 million euroreceivable from carved-out business) will be fully settled in cash.” Asked why CSG did not disclose that Ytara was owned by Strnad in the prospectus, the company said the information is publicly available in the Czech Commercial Register and reiterated that “all relevant related-party transactions were properly disclosed” in the prospectus.

“Disposing” of subsidiaries by moving them to the CEO’s personal vehicle isn’t the only way the company’s assets seem to flow to company insiders. As of 2024, Excalibur Army, perhaps CSG’s richest subsidiary, reported CZK 118 million (~4.7 million euros) in “other short-term receivables,” which consisted principally of receivables from Jaroslav Strnad, the company’s founder and current CEO’s father — a detail not disclosed as a related-party transaction at the group level. Excalibur Army also wrote off CZK 327 million (~13 million euros) in “time-barred receivables” — debts so old the company gave up collecting — raising the question of whether the same fate awaits the company’s claim on the senior Strnad.

For its part, CSG dismissed the 13 million euro write-off of time-barred receivables at Excalibur Army as an accounting necessity, saying it “does not represent the incurred losses but rather only theoretic risk.” The company did not address the 4.7 million euro receivable from Jaroslav Strnad.

Excalibur Army’s 2024 filing also lists a waste disposal company as a contract counterparty, with contracts dating back to 2015 on services including office rental and sewage operation.14 That company’s own filing shows 90% of the company was moved out of CSG into Jaroslav Strnad’s personal company, CE Industries, in 2019. CSG did not disclose this as a related-party transaction in its prospectus.

In another example of funds moving into Strnad’s orbit, the cash trail could be extended even further — to political partners. After leaving CSG in 2022, former Vice-Chairman Miroslav Dorňák acquired, at an undisclosed price, a real estate company to which CSG had previously transferred CSG’s real estate assets, also for an undisclosed price. The company then bought the building into which CSG moved its headquarters, according to multiple Czech press reports and registry filings.15 Essentially, CSG now pays rent to its former vice-chairman’s company.

In an email to Hunterbrook, CSG called the lease “a standard landlord–tenant relationship” and said it does “not comment on the business activities of third parties.”

A Czech registry filing shows Dorňák also owns a Czech crowdfunding platform called FinGood, which shares the same address as CSG’s headquarters.16 According to a March 2026 investigation by Seznam Zprávy, FinGood paid millions to Slovak Defense Minister Kaliňák’s legal consultancy firm, Kallan Legal, citing a former CEO and co-owner of Kallan and the current FinGood CEO who confirmed the payments. Seznam Zprávy alleged that CSG, including Michal Strnad personally, was involved in the management of FinGood, citing FinGood employees and internal emails obtained by the outlet.

Kaliňák, as noted earlier, is behind the recent 58 billion euro ammunition deal with CSG.

The Shadows Behind the Empire

CSG’s post-IPO disclosures may be lacking. But they’re less surprising when set against the company’s history — a three-decade record of political patronage, questionable acquisitions, and ties to figures that would give any compliance officer pause.

The company’s origin story is inseparable from Czech state connections. CSG was founded by the CEO’s father, Jaroslav Strnad, in the mid-1990s as a scrap dealer, collecting Societ-era military assets liquidated after the Cold War, refurbishing them, and reselling them at a markup. Jaroslav Strnad’s father-in-law served as deputy head of the material and technical support office at the Czech defense ministry — a role that Czech media reported helped steer Strnad toward his surplus military equipment deals.

Numerous accounts of CSG’s dealings highlight its ties to Miloš Zeman, who served as the president of the Czech Republic from 2013 to 2023. CSG’s domestic growth accelerated after Zeman took office in 2013.

Ahead of Zeman’s 2018 re-election, Jaroslav Strnad became Zeman’s largest campaign donor. Two Strnad-linked firms, DAKO-CZ and Composite Components, together accounted for two-thirds of all campaign contributions, according to OCCRP. Seznam Zprávy reported that his son, Michal Strnad, used a car pawn company to channel hidden cash to Zeman’s campaign: Internal documents recorded a CZK 950,000 transfer as directed by Strnad personally, routed through an intermediary entity called Car Service Group CZ.

Milestones in CSG’s growth during Zeman’s tenure, including major acquisitions and contracts, were often flagged by journalists and regulators as irregular. For example, an investigation by the Ukrainian outlet Gordon found the sale of an armored vehicle repair and production factory to the then-named Excalibur Army in 2013 “puzzling,” noting the state had spent substantial sums of money reconstructing it; a source told Euro that Strnad bought the plant “for a really good price.” Other coverage found CSG had received major orders from the government without a competitive tender for one truck contract in 2017.

Some investigations even led to formal arrests, only for the cases to be dismissed later. In 2015, defense ministry and army personnel were charged with transferring surplus Czech military property — specifically tank engines and spare parts — to Excalibur at below-market prices. The case later ended in acquittal, with Česká Justice reporting a “complete failure of the investigative bodies.” Notably, two of the acquitted defense ministry officials ended up working for Strnad.

Other cases are ongoing.

Marián Goga, former president and 10% owner of MSM Group — the parent company controlling CSG’s ammunition businesses, is currently facing criminal charges in Slovakia for “bribery and money laundering.17”

Prosecutors alleged Goga, in his former capacity as the head of CSG subsidiary MSM Martin, steered a public tender for recovery tanks through a bribery scheme in which MSM Martin paid 15 months of warehouse rent in a single day to an intermediary, who then transferred two below-market apartments to the son of the state strategic reserves chief. The intermediary reportedly committed suicide after the transfers became public.

MSM Martin, which is a codefendant, could face serious consequences if found guilty, CSG disclosed in the prospectus. Penalties could include “the forfeiture of assets,” a “financial penalty,” and “a prohibition on receiving EU funds” — in light of which MSM Martin “wound down all business activities and is currently a dormant entity with no significant assets.” Ahead of the IPO, CSG reorganized its structure to remove MSM Martin and Goga’s shares in MSM Group. It’s unclear how Goga was compensated.

CSG told Hunterbrook in an email that Goga “was indeed a former shareholder and executive director of MSM Martin” and was a shareholder of MSM Group “until January 2026, i.e. prior to the IPO.” But the company also confirmed that Goga “currently serves on the supervisory board of MSM Group” — a fact the prospectus omitted. CSG said Goga “has played a positive role in the development of the business and continues to support the company in this supervisory capacity,” and that the criminal proceedings “remain ongoing” with “no material developments.”

The pattern of strange deals extends beyond Europe. CSG’s announced contracts in Southeast Asia — a region the company has cited as a growth market — often flow to a single country, Indonesia, and substantially through a single intermediary. Since 2015, CSG subsidiaries have announced roughly $3.7 billion to $4 billion in Southeast Asian defense contracts, including an over 500 million euro KHAN ballistic missile package signed in November 2022, a $300 million Patriot II armored vehicle deal announced 13 days after the January 2026 IPO, and a $2.5 billion air-defense megapackage disclosed in April 2026.

Some of these deals are, themselves, reportedly funded by the Czech Export Bank — a state-owned institution backed by Czech taxpayers. The structure is circular: A Czech state bank lends to Jakarta so Jakarta can pay a Czech private company, and the resulting revenue inflates the backlog that helped underpin CSG’s 25 billion euro IPO valuation.

Then there is the question of where CSG’s original capital came from. Foreign Policy reported in 2018 that one of Jaroslav Strnad’s key investors was Alexei Belyaev, described as connected to Vladimir Yakunin, the sanctioned former head of Russian Railways and Putin associate. Corporate filings confirm that Belyaev and his partner Michal Lazar were co-investors in DAKO-CZ, a CSG subsidiary. Belyaev joined DAKO-CZ’s supervisory board in 2016.

A WikiLeaks-published U.S. Embassy cable identified Lazar as suspected of organized crime connections; the cable noted that Slovak police appeared “clearly uncomfortable” discussing him. “Strnad’s partner is widely reported to have a business association with senior Russian intelligence officers,” The American Spectator wrote.

Belyaev and Lazar’s company, Optifin Invest, reportedly became a major co-investor in CSG entities. A Czech security analyst told Ukrainian news outlet Gordon in 2020 that this structure was designed so that “Belyaev was the one who was coordinating the whole strategy from the very beginning” of CSG’s expansion.

Journalist Jaroslav Spurný told Gordon, citing internal sources, that “substantial amounts involving Russian financing” flowed through Creditas bank — which shared a Prague office building with CSG and had connections to First Czech-Russian Bank, described by Czech intelligence as an FSB, or Russian intelligence, instrument. CSG had a separate revolving loan from Creditas worth up to CZK 330 million, according to Czech news organization Euro. A former Czech intelligence chief told Gordon that CSG is “in bad financial state and these debts are all owed to the Russians.” CSG has denied the Russian financing allegations, and the Belyaev/Lazar involvement formally ended with a 2021 DAKO-CZ stake sale. CSG told Hunterbrook it “immediately ceased all activities in Russia” in 2022.

But the security concerns over CSG’s ties to Russia were apparently serious enough that a CSG subsidiary had issues receiving a security clearance from the Czech National Security Office — effectively barring CSG from supplying the Czech military. Defense Minister Karla Šlechtová confirmed: “If someone does not have the requisite security clearance, they do not meet the formal criteria to receive an order, and thus cannot receive it. This is exactly what happened with the Czechoslovak Group.”

The company did not appeal the decision in court — a choice a former head of Czech intelligence noted suggested CSG had “real problems” it did not want aired publicly, according to Gordon. Strnad “transferred all of his companies to his 25-year-old son Michal.” CSG denied any connection between the clearance issue and the transfer.

Jaroslav Strnad admitted as much himself, though he put it a bit more mildly: “I understand that my name is connected to a number of people and events that could negatively impact the company and its reputation,” he told Respekt in 2018.

These concerns resurfaced in 2024 — this time in the U.S. — when multiple Republican senators including JD Vance raised objections to CFIUS about CSG’s acquisition of Vista Outdoor’s ammunition unit, The Kinetic Group.

“We cannot afford for America’s supply of weapons to fall into the wrong hands,” Vance wrote in a January 2024 letter to U.S. Treasury Secretary Janet Yellen, requesting a security review of the sale. “Until it can be proven that this transaction will not jeopardize our national security, I respectfully urge you to deny the sale of Vista Outdoor’s Sporting Products business to the Czechoslovak Group.”

Vance’s letter raised concerns about ties to Putin’s inner circle, including the company’s sponsorship of a show in Moscow aimed at facilitating Russian access to European military technology. CFIUS ultimately approved the deal.

But CSG’s choice of personnel reinforces the pattern. In February 2024, CSG appointed Jan Hamáček as its director of external relations. Hamáček had previously served as Czech minister of the interior — and was investigated by the Czech National Center for Organized Crime after Seznam Zprávy reported that he had planned to travel to Moscow to exchange Czech silence on the 2014 Vrbětice ammunition depot explosions — which killed two Czech citizens and were attributed to GRU agents — for, among other things, a Biden-Putin summit in Prague.

Police ultimately dropped the case because Hamáček did not end up taking the trip to Moscow. But a company that hires an official investigated for involvement in a Russian intelligence operation to run its government relations is making a statement about its priorities — whether it intends to or not.

It’s an especially odd statement, of course, from a company whose riches — however ephemeral they may be — are a direct result of Russia’s invasion of Ukraine.

Read the full version of the investigation, including all of the footnotes, on our website at hntrbrk.com/csg.

Authors

Jenny Ahn joined Hunterbrook after serving many years as a senior analyst in the US government. She is a seasoned geopolitical expert with a particular focus on the Asia-Pacific and has diverse overseas experience. She has an M.A. in International Affairs from Yale and a B.S. in International Relations from Stanford. Jenny is based in Virginia.

Till Daldrup is an investigative journalist who joined Hunterbrook from The Wall Street Journal, where he focused on open-source investigations and content verification. In 2023, he was part of a team of reporters who won a Gerald Loeb Award for an investigation that revealed how Russia is stealing grain from occupied parts of Ukraine. He has an M.A. in Journalism from New York University and a B.S. in Social Sciences from University of Cologne. He’s also an alum of the Cologne School of Journalism (Kölner Journalistenschule).

Blake Spendley joined Hunterbrook from the Center for Naval Analyses (CNA), where he led investigations as a Research Specialist for the Marine Corps and US Navy. He built and owns the leading open-source intelligence (OSINT) account on X/Twitter, called @OSINTTechnical (over 1 million followers), which also distributes Hunterbrook Media reporting. His OSINT research has been published in Bloomberg, the Wall Street Journal, and The Economist, among other top business outlets. He has a B.A. in Political Science from USC.

EDITOR

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. He helped build Fenway Strategies into one of the preeminent strategic communications firms in the country—with side quests speechwriting for Michael Bloomberg, running the surrogate remarks operation on the Biden-Harris campaign, and co-founding Mayday, which is now one of the leading information providers on how to access reproductive health care in states with bans. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

Graphic

Dan DeLorenzo is a creative director with 25 years reporting news through visuals. Since first joining a newsroom graphics department in 2001, he has built teams at Bloomberg News, Bridgewater Associates, and the United Nations, and published groundbreaking visual journalism at The Wall Street Journal, Associated Press, The New York Times, and Business Insider. A passion for the craft has landed him at the helm of newsroom teams, on the ground in humanitarian emergencies, and at the epicenter of the world’s largest hedge fund. He runs DGFX Studio, a creative agency serving top organizations in media, finance, and civil society with data visualization, cartography, and strategic visual intelligence. He moonlights as a professional sailor working toward a USCG captain’s license and is a certified Pilates instructor.

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Datadog told Wall Street it had landed an eight-figure deal with “one of the largest AI foundational model companies” — but didn’t say which one. Hunterbrook found Datadog’s monitoring software embedded across Claude sessions and products, with public bug reports dating back to January and a leaked source map suggesting a much deeper rollout may be ahead. If the biggest new logo in Datadog’s history is who we think it is, the consumption-priced contract could scale directly with Anthropic’s growth.

Anthropic has got that dog in them.

When Datadog ($DDOG) told analysts on its fourth-quarter earnings call in February that it had landed an “eight-figure annualized” deal with “one of the largest AI foundational model companies” — among the biggest new logos in the company’s history — CEO Olivier Pomel didn’t name the customer.

Datadog’s CFO David Obstler said the company modeled the contract with “very conservative” assumptions in 2026 guidance because of the unpredictability that consumption-based pricing introduces. A handful of analysts speculated about Anthropic being the customer. Neither company confirmed, though several Datadog employees liked a LinkedIn post whose author inferred an Anthropic partnership.

Hunterbrook Media dove deep into live browser traffic from Claude.ai and public bug reports filed against its developer tools to establish what had not previously been proven:

Datadog’s big new customer indeed appears to be the fastest-growing software company of all time — not bad for a deal with consumption-based pricing.

The evidence of an Anthropic partnership comes in two distinct forms.

The first is solid, universal, and trivial to verify: Datadog’s monitoring software is deeply embedded in Claude products, watching the sessions of millions of everyday users. This is incontrovertible — though comparatively modest financially.

The second is more circumstantial but suggestive of a much larger ticket: Anthropic appears to be quietly exploring using Datadog for all its essential telemetry — in a phased, experimental way that hasn’t been publicly disclosed, dating back to at least January.

One key clue came from a March 31 leak.

None of this is direct confirmation — and Anthropic may just be testing Datadog. But the evidence… certainly seems to amount to both bark and bite.

Datadog Likely Watches All Your Claude Sessions

Big Datadog is watching.

Hunterbrook’s engineering team conducted a live test using various Anthropic products.

What we found:

After loading Claude in your browser or desktop, Anthropic quietly ships packets of data capturing that experience — from how fast the page rendered to whether a script crashed — over to Datadog. That’s called telemetry. It’s how Anthropic engineers track whether things are working or not, and collect data to improve the experience of using Claude for all of its estimated 30 million users.

What Anthropic is trusting Datadog with is not trivial. A one-second slowdown or a silent error in the Claude composer can translate directly into churn and lost revenue. You can’t fix what you can’t see, and you can’t see tens of millions of browsers without piping their experience back to a central system.

And it’s not just product analytics: Anthropic classifies Datadog Real User Monitoring (RUM) as essential — crash reports, error stack traces, and performance timings — meaning that it’s enabled by default, and enterprise customers need to actively elect to turn it off.

Datadog sells one of the most widely used RUM tools on the internet — which has helped power Datadog to its $45 billion market cap. RUM runs inside the user’s browser and ships that data regularly back to Datadog, where Anthropic’s engineers use it to find bugs and measure speed.

A live inspection of Claude.ai conducted for this story found the Datadog RUM software development kit — a small bundle of code that the website loads into the visitor’s browser — initialized with the service name claude-ai, the environment set to production, and a sample rate of 100%. That means literally every consumer session on the chat product is captured by Datadog. The same SDK is bundled inside the Claude desktop app.

Early Signs of a Wider Rollout

The second finding is harder to interpret. But, taken together with the first, paints a clearer picture.

Anthropic appears to be rolling out Datadog much deeper than RUM — using it for more types of telemetry — in a phased way that is consistent with an account in active expansion.

The clearest indicator is Claude Code, Anthropic’s developer command-line tool.

As part of a module, its source code contains a hard-coded Datadog client token and a dedicated Datadog integration, where there is capability for Claude Code to send telemetry events to Datadog. This is distinct from Datadog’s browser RUM product, which Anthropic is already using: Claude Code shipped with wirings to send analytics and telemetry to Datadog. Whether each user actually sends data to Datadog is governed by what engineers call a feature flag — an on-off switch that lets a company turn a feature on for some users and off for others.

The switch is named tengu_log_datadog_events. A user-submitted configuration dump captured the switch turned on, paired with settings that bundle telemetry into batches before sending — the architecture of a production telemetry pipeline mid-rollout, not a one-off debug log. The flag is managed through a third-party A/B testing tool called GrowthBook, the standard mechanism companies use to roll new features out to small subsets of users at a time.

Public bug reports show the rollout is real, even if its breadth is unclear.

As early as January 6, a user noticed Claude Code calling datadoghq.com every few seconds throughout each session and complained that the calls were undisclosed; the issue was closed as “not planned.” On March 13, another user reported that during a memory problem, Claude Code generated 1.2 million error log lines in roughly 80 minutes — a loop of failed attempts to deliver telemetry to https://http-intake.logs.us5.datadoghq.com/api/v2/logs, Datadog’s log-ingestion endpoint.

A March 18 outage report showed the same Datadog endpoint failing in lockstep with api.anthropic.com, suggesting the connection is part of the production critical path for users who have it turned on. Anthropic enterprise feature Cowork is similarly instrumented: A March 26 bug report references its OpenTelemetry exporter attempting to ship events to https://otlp.us5.datadoghq.com/v1/logs, with event types named user_prompt, api_request, api_error, tool_result and tool_decision. This is Datadog’s instance of the OpenTelemetry protocol, which signals that Anthropic is exploring using Datadog’s infrastructure for the telemetry surface of an LLM application.

The most direct evidence emerged on March 31, when Anthropic seemingly accidentally shipped a sourcemap file inside a software update to Claude Code — a debug file that maps the product’s compiled code back to its original internal layout, effectively a blueprint of the source tree. Several independent researchers — including Karan Prasad and Engineer’s Codex — had pulled the file apart and posted their findings. Among the files they identified was a path indicating a dedicated Datadog integration module sitting alongside Anthropic’s other analytics services.

A Chinese explanation of how this works was posted to GitHub. Here is a data flow diagram created by Hunterbrook summarizing the findings:

Why Occam’s Razor Is Anthropic

Datadog’s earnings-call description matches Anthropic’s known stack. Pomel told analysts the customer — the largest “new logo” in Datadog’s history — was consolidating onto Datadog from a fragmented mix of “more than five open-source, commercial, hyperscaler, and in-house” tools. That description fits Anthropic. Grafana Labs, a prominent open-source observability vendor, publicly names Anthropic as a customer in its September 2025 annual recurring revenue announcement — supplying exactly the kind of open-source observability tooling Pomel said the customer was migrating away from.

The “new logo” qualifier — Wall Street shorthand for a brand-new enterprise relationship, not the expansion of an existing one — narrows the field further. OpenAI, long flagged by analysts as Datadog’s largest single customer, is by definition not a new logo.

Among AI labs operating at the scale implied by an eight-figure annual contract, that leaves Anthropic as perhaps the most plausible candidate.

The two companies have also been moving toward each other publicly for more than a year. At Datadog’s DASH 2024 conference, Anthropic President Daniela Amodei announced a joint product integration. Datadog now publishes a dedicated Anthropic monitoring product and a Cloud Cost Management integration for tracking Anthropic spend, and is itself a named member of Anthropic’s Claude Design research beta.

The relationship cuts against a specific bear thesis on Datadog. Some investors have argued that AI-native companies will eventually “vibe code” their way out of buying observability software, building in-house tools instead. (A July 2025 Tegus interview with an Anthropic employee propagated this thesis, claiming the company “didn’t even touch Datadog ever.” That was, of course, before the announced partnership.)

Anthropic, the frontier-AI customer most capable of doing exactly that kind of vibe coding — and, according to Pomel, already running in-house tools before the deal — seemingly chose instead to consolidate at least five tools onto Datadog.

It’s living proof that there are plenty of “pick-and-shovel” plays left in software: OpenAI and Anthropic aren’t necessarily going to vibe code their own observability stacks — at least not now. They have better things to do. They need something robust and rigorous, so they tapped Datadog.

Observability software is like soy sauce. Whereas a Japanese restaurant specializing in making a few complicated dishes–say, Netflix or Salesforce–might make their soy sauce in house to suit their unique needs, Chinese restaurants generally buy their soy sauce from three trusted brands. Much like a rapidly-growing AI company like Anthropic, Chinese restaurants tend to have huge menus and wide offerings; the last thing the kitchen should worry about is making its own soy sauce.

But you can make a lot of money selling soy sauce to Chinese restaurants!

The OpenAI contract, alone, represents “4-6% of DDOG’s revenue run-rate,” wrote Wells Fargo last year, estimating it would total roughly $200 million annualized.

Because the Anthropic contract appears to be consumption-priced, Datadog’s revenue from that deal increases with every increment of Anthropic’s usage curve.

Which, right now, looks like this:

Author

Jean Wang is a machine learning engineer and data scientist at Hunterbrook Media. Previously, Jean worked on the alternative credit and fixed income desk at Magnetar Capital, studied Math at Yale University, and served as an editor for the Yale Daily News.

Editor

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets. He has a BA in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

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“I literally think all the marks are wrong.”

A few weeks ago, Apollo’s John Zito found himself unexpectedly in the headlines for brutally honest remarks he thought were off the record about private market valuations.

As the co-president of Apollo’s asset management arm, Zito is a titan in the private credit and private equity markets. And his grim assessment added fuel to the fire that is racing through an industry whose marks are being more heavily scrutinized amid a “SaaSpocalypse” triggered by AI disruption.

The funny thing about the discourse, as Zito pointed out, is that so far, it has mostly focused on private credit, rather than private equity. This ignores a basic rule of finance: In any capital structure, debt is the safety net, and equity is the high-wire act.

Which is to say: If people are scared of the debt, they should be terrified of the equity. “I can’t compute, but I’m the dumb guy,” Zito said. “I don’t understand.”

Zito isn’t dumb.

And if the cracks he identified are indeed signs of a larger structural failure — as JPMorgan’s Jamie Dimon and former Goldman Sachs CEO Lloyd Blankfein have also signaled — one place they might manifest is private markets colossus Hamilton Lane ($HLNE).

This week, the private equity firm — which sells to retail investors — recorded its largest net outflow in recent history with investors pulling an estimated $172 million from the fund in March alone. Redemptions like these could create a feedback loop, through which the true value of Hamilton Lane’s assets, independent of its current mark, could be revealed.

A Gatekeeper to Private Equity

Headquartered in Conshohocken, Pennsylvania, Hamilton Lane is a roughly $4 billion market cap investment powerhouse that has spent three decades evolving from a niche research shop into a gatekeeper for the private markets. As of last year, it managed or advised on $1 trillion of assets, and it positions itself as the bridge between institutional-grade private equity and a new, hungry class of retail investors.

In the last five years, Hamilton Lane has made its business, which mostly comes from the assets it manages, increasingly dependent on buying assets known as “secondaries.” This is particularly true of the almost $6 billion Hamilton Lane Private Assets Fund, or PAF. In other words, Hamilton Lane has increasingly bought stakes in private equity portfolios from sellers who want to unload them.

This has looked like a fantastic business in part because of a specific accounting quirk first scrutinized by The Wall Street Journal: Hamilton Lane buys the assets at what it considers a discount and can then promptly mark these assets back up to the previous valuation, even if there were no buyers at that old price. We’ll refer to these as “day-one markups.”

Last year, Hamilton Lane brewed another accounting potion, changing the way the firm is compensated. It used to be paid incentive fees when gains were realized — meaning when the underlying assets were actually sold. Now, it can collect its fees regularly based simply on increasing its own marks on its investments, including those day-one markups. The change allowed Hamilton Lane to pull forward fees that may have taken years to accrue. Thanks to the new fee structure, Hamilton Lane took in $58 million of incentive fees from the Private Assets Fund in the year that ended in March 2025.

In a statement to Hunterbrook addressing the issue, the company said that “because semi-liquid funds typically reinvest proceeds rather than distribute them, traditional carry calculations based on distributions are less appropriate, making NAV-based carry a better fit.”

The firm made another change at the same time, one that has gone largely unremarked: It began excluding stock-based compensation from its fee-related earnings calculation, just like competitors like Blackstone ($BX), Apollo ($APO), and Carlyle ($CG) do. The combined effect of the two changes — adding performance fees based on unrealized gains as a revenue stream and stripping out stock-based compensation from expenses — moved Hamilton Lane’s reported fee-related earnings margin (which is an important component in how Wall Street values firms like Hamilton Lane) from roughly 32% to approximately 59% for the nine months ending in December 2025.1

The decision to exclude stock-based compensation isn’t all that unusual — but the timing is worth noting. About six months before Hamilton Lane changed its calculation of the metric, co-CEOs Erik Hirsch and Juan Delgado-Moreira each received 544,000 restricted shares — a grant valued at roughly $71 million apiece, with vesting tied to stock price targets.

While previous reporting by both The Wall Street Journal and the Financial Times identified the existence of the day-one markups and the firm’s new fee structure, our reporting goes a step further to reveal the true depth of the distortion. An analysis conducted by Hunterbrook shows that about a third of the total gains in valuations across PAF’s portfolio were largely generated by these accounting uplifts, rather than any actual appreciation of the companies owned.2 (In a statement to Huntebrook, Hamilton Lane said that more than 70% of secondary returns in the fund are not a result of the day-one markups, roughly confirming our estimate that one third of the returns is attributable.)

And the change to the way Hamilton Lane collects fees explains more than all of its recent fee-related earnings growth. In other words, without the change to collecting fees along the way, rather than growing fee-related earnings by 37%, earnings actually would have gone down over the last nine months of 2025.3

In good times, Hamilton Lane’s accounting alchemy can seem infinitely repeatable: Raise money, buy assets, mark up assets to charge performance fees, report high returns, use those high returns to raise more money from retail investors, use that money to buy more assets, and on and on.

But when investors begin to look behind the curtain, they may notice that some of their returns exist only in the realm of illusion — and that they are paying Hamilton Lane fees for those fantastical returns.

If the enchanted flywheel breaks, and Hamilton Lane can’t keep raising billions of dollars to buy (and then immediately mark up) new assets, the magic can start moving in reverse: Redemptions lead to forced asset sales lead to markdowns lead to pressure on reported returns lead to stalled fundraising, etc.

The only question, for now, is whether investors open that Pandora’s Box.

This is, oddly enough, an analogy Hamilton Lane has wholeheartedly embraced, albeit in a slightly different context.

In a recent 2026 market overview presentation that is an exercise in mixed metaphors and potentially unintended messages, Hamilton Lane’s former CEO, Mario Giannini, who still serves as executive co-chairman and on the investment committees of its various funds, dressed up as Gandalf from The Lord of the Rings. “What do you think Pandora imagined the moment she opened that box?” he asked. “A box that shouldn’t be opened is opened anyway and out pours … what exactly? Depends on who you ask.” He said investors should think of Hamilton Lane as the “Gandalf of the private markets Middle Earth,” sent to “guide and inspire” them on their journey.

The problem for Hamilton Lane itself is that in this business, eventually, reality has a way of being a Morgoth. Just like with private credit funds, investors are starting to worry about private equity, too — and could begin to demand their money back from PAF. Hamilton Lane’s stock is already down 50% from its peak amid this fear. And there are reasons to believe that it could fall much, much further.

Asked repeatedly about these issues, Hamilton Lane did not initially respond over a period of days; then, once receipt was confirmed, the company made legal threats to a Hunterbrook reporter, and, finally, provided answers to our questions. “The way we calculate fees is in fact the industry standard, and you can find examples of numerous other funds, including ones with strong secondary exposure,” said a spokesperson. Indeed, other funds, like Blackstone, Apollo, and Carlyle, collect performance fees that aren’t dependent on selling underlying investments.

The statement continued: “While the discounts in secondaries are intended to be additive to performance, in accordance with U.S. accounting standards, our analysis shows that the vast majority of long-term performance comes from underlying growth of the companies.”

Deference to Marks

Hirsch and Delgado-Moreira took over Hamilton Lane in 2024, more than three decades after Hamilton Lane’s founding by Leslie Brun, who came to the U.S. from Haiti as a young boy.

The original idea was to provide research for institutions that wanted to invest in private equity. Brun, who is now the cofounder, chairman, and CEO of Ariel Alternatives, departed in 2005 and seemingly has little to do with Hamilton Lane. Over the years, the business shifted away from just advising other investors, and toward managing capital directly. By the time Hamilton Lane went public in 2017, it managed $40 billion in assets, primarily by making investments in other funds or investing directly alongside those funds.

Just after the IPO, Hamilton Lane found itself enmeshed in the Abraaj scandal, where a Dubai-based private equity firm that at its peak managed almost $14 billion unraveled due to alleged fraud. Hamilton Lane had committed clients’ money to an Abraaj fund — despite warnings about valuation problems, according to The Economist.

On September 20, 2017, an anonymous whistleblower emailed Hamilton Lane executives, warning that Abraaj was overvaluing its holdings and that deals in its pipeline were dead. The email urged Hamilton Lane to do proper diligence before committing to Abraaj’s new Fund 6. Instead, Hamilton Lane employee Tarang Katira, who ran fund investments across Europe, the Middle East, and Africa, forwarded the whistleblower’s email directly to Abraaj founder Arif Naqvi, according to Bloomberg and The National reporting at the time.

Katira wrote to Naqvi that he was sending it so Naqvi would be aware the email was “out there and clearly targeting LPs.” Despite the warning, Hamilton Lane went on to commit $100 million to Abraaj Fund 6 — a commitment that reportedly encouraged other investors to put in roughly $900 million more. (Fund 6 never closed after the scandal broke, so those specific commitments did not result in losses; Hamilton Lane’s total Abraaj exposure across funds was approximately $382 million.)

The firm eventually shook off the Abraaj taint. But the episode illuminated something about how Hamilton Lane relates to other firms’ marks: with deference. The business it has built since is, in a sense, one where that deference is no longer a bug — where accepting the fund manager’s number has become the business model.

Hamilton Lane has doubled down on two strategies, in particular, that have helped catapulted the firm into the stratosphere.

The first was the launch, in 2019, of what are called evergreen funds. Traditional private equity funds raise money at the start of their life cycle. The money is usually locked up for about a decade. An evergreen fund, on the other hand, raises money by selling shares continuously. Existing investors are allowed to withdraw specified amounts at specified times. Hamilton Lane says that “upwards of 25%–30%” of its capital comes from institutions, but this liquidity-on-demand promise helped open the floodgates to retail investors.

In its recent presentation, Hamilton Lane’s Beth Nardi said that its evergreen funds are “really shaking things up.” The reason is that they are so easy for retail investors to use. “Prior to evergreens, investing in the private markets was, let’s be honest, a hassle,” added Brian Gildea, who runs the firm’s evergreen business.

Since 2020, the industry-wide evergreen business has more than tripled, to roughly $700 billion in global assets as of 2024. Bigger firms, like Blackstone, Apollo, and the ever-controversial Blue Owl ($OWL), are in the game, too, because everyone wants to get their hands on retail investors’ money — not to mention collect permanent fees, instead of having to launch new funds in order to keep the fees coming in.

Today, Hamilton Lane manages $17 billion of assets in various evergreen products, up from almost nothing in 2020 — and up 70% in just 2025. None of its competitors are as exposed to the retail business. Goldman Sach’s analysis shows that Hamilton Lane derives 34% of its management and incentive fees from retail and evergreen vehicles, versus 24% at Blackstone, 23% at Blue Owl, and single digits at Carlyle and Brookfield ($BAM).

The second big move was plowing all that retail money into the secondary market. This business has come into existence not because private equity is doing so well, but rather because it is struggling. Private equity firms are having a tough time cashing out in the usual ways, like selling a company or taking it public, and so a massive backlog of unsold companies has formed. According to McKinsey’s most recent Global Private Markets Report, over 16,000 buyout-backed companies have been held for more than four years — 52% of total buyout inventory, the highest share on record.

Investors are understandably antsy. So the way for existing investors to get out is selling their stakes to a new buyer, usually at a discount to their marks. In 2025, secondary transaction volume hit all-time highs, up 48% year-over-year. Hamilton Lane has been a huge buyer — at PAF, secondary stakes appear to account for almost half the fund’s value.

Where others see a crisis of liquidity, Hamilton Lane sees a heroic opportunity. The firm presents itself as the savior of the private equity ecosystem. After outlining the problems, Hamilton Lane’s co-head of secondary investments, Tom Kerr, who was dressed up as a knight, said, “Secondaries to the rescue!” He added, “Grab your shield, join the charge, let secondaries lead you to solid ground.”

The ground might be a tad shakier for buyers, however. Despite its medieval theme, Hamilton Lane’s video doesn’t mention the accounting sorcery laced through the company’s results. The day-one markups happen consistently — for example, last December, PAF acquired a stake in an A.Capital Partners vehicle for $50 million, and marked it up to $68.5 million within the same month. That same month, on December 31, a stake in a Hellman & Friedman fund was acquired for $20.3 million and marked up to $23.9 million the same day.

It’s not surprising that day-one markups account for about a third of PAF’s reported returns, according to an analysis conducted by Hunterbrook.

“The fair values of such investments as reflected in a fund’s NAV do not necessarily reflect the prices that would actually be obtained if such investments were sold.”

The practice of marking up assets on day one is allowed under accounting rules called a “practical expedient”: essentially a shortcut to make complex accounting easier. Hamilton Lane is not the only private equity player that takes advantage of this accounting practice: from StepStone ($STEP) to Apollo, funds utilize day-one markups of secondary interests. For example, the Apollo S3 Private Markets Fund, also an evergreen fund offered to retail investors, marks up stakes immediately.

At least three investor advocates have asked the Financial Accounting Standards Board to reconsider guidance that permits the practice. In one recent request, Mark J. Higgins of Enlightened Investor argues that markets have evolved since the existing guidance was issued. Indeed, while Hamilton Lane touts the depth of its relationships as a reason it can buy stakes at a discount, the secondaries business has become incredibly competitive. Investment banks like Evercore brag about their business advising buyers and sellers of secondary stakes.

If lots of people are fighting to buy something, it’s hard to believe anyone’s getting a steal. And if secondary transactions are occurring at ever-higher frequency and volume, why is there a need for expediency? Isn’t the price at which the secondary transactions occur a more accurate measure of value than the underlying fund’s NAV?

Some industry insiders defend the practice. At a recent SEC panel, Blake Nesbitt, the chief investment officer of the asset management firm Cliffwater, said the valuation process is not ideal — and leaves room for error — but noted that buyers don’t have the ability to delve into all of the underlying investments and figure out what each one is worth. For that reason, accepting a fund’s valuation can simplify an otherwise arduous task.

Others, including a former Hamilton Lane employee who spoke with Hunterbrook, argue that the actual sellers — investors in private equity funds — are willing to accept less than their stake might otherwise be worth in order to get liquidity. In its comment to Hunterbrook, Hamilton Lane says, “The simple fact is that investors in private equity funds will often sell their fund interests in the secondary market at a discount to their current value in exchange for liquidity prior to the end of a fund’s term. These transactions are negotiated between a willing seller and a willing buyer and are based on a record date valuation that is often months or quarters in advance of the transaction closing.” Which may be true, but does not account for the expanding depth of the secondary market itself and what that may mean for these “liquidity” discounts.

In Hamilton Lane’s market presentation, Gildea, co-head of evergreen portfolios, took a slightly different tack, saying it’s “clear” that the criticism that evergreen funds’ returns are not sustainable because of their use of secondaries to boost returns cannot be true, because to date, evergreen funds have outperformed. Well, yes, but every magic trick fools the audience until it doesn’t. If funds are outperforming based on marks that haven’t been tested, are they really outperforming?

Then there is the growing constipation in private equity: the industry’s increasing inability to exit the companies it owns. It’s hard to escape the logic that the gigantic backlog of unsold PE-backed companies reflects a growing disconnect between private equity marks and what buyers are willing to pay.

Add to all that the SaaSpocalypse. Software represents approximately 25% of total PE deal value over the past five years, and publicly traded software companies have plunged due to worries about the disruption from AI. Just as the buyout debt is being repriced by a skeptical market, the equity is facing a valuation reckoning that the industry’s internal marks have yet to acknowledge.

A March note from research firm KBW quantified Hamilton Lane’s exposure. After a trip with the company’s CFO and investor relations team, analyst Alex Bond reported that software represents 23% of total fee-paying assets under management and 30% of PAF.

Publicly, both private equity and private credit firms say their investments are doing fine. And one genuine advantage of private equity math, compared to private credit math, is that funds can be worth a great deal even if most investments are losers, so long as there’s one big winner that compensates for the wreckage. Power law and all that.

But it’s a little hard to believe that investors would be offloading stakes to Hamilton Lane at such steep discounts if the funds truly held such trophy assets.

And privately, you hear some doubts about the quality of these private market portfolios more generally. “Most of the businesses that were bought from 2018 to 2022 are lower quality than those companies,” Apollo’s Zito said in that supposedly off-the-record conversation, comparing private software businesses unfavorably to their public market counterparts. (Apollo shared in an earnings call that the company has 0% exposure to software in its private equity business.) “So I am concerned about many of [those] take-privates,” Zito noted.

Hamilton Lane’s own disclosures acknowledge the uncertainty: “Because there is significant uncertainty in the valuation of, or in the stability of the value of, illiquid investments, the fair values of such investments as reflected in a fund’s NAV do not necessarily reflect the prices that would actually be obtained if such investments were sold.”

A “Very Dangerous” Combination

While it’s true that other funds are also taking fees on unrealized gains, even industry veterans are taken aback by the combination of the evergreen fee structure and the reliance on day-one mark ups. Nesbitt, the Cliffwater CIO, called it “very dangerous,” noting that this structure effectively prioritizes the general partner’s fees over the investor’s reality. He called the arrangement “unheard of” in the history of private markets.

What isn’t widely understood is what a huge impact the accounting magic has had on Hamilton Lane’s earnings.

Overall, in the latest earnings call, Hamilton Lane reported $507 million in fee-related revenue for the nine months ending December 2025, with fee-related earnings up 37% year-over-year. But buried inside those stellar numbers is a newly created metric doing most of the heavy lifting.

Hamilton Lane’s total fee-related revenue is now the sum of standard management fees and something called “fee-related performance revenues,” or FRPR. In early 2025, Hamilton Lane said it “modified” its definition of fee-related earnings to exclude equity-based compensation and include FRPR. FRPR, says the firm, is “not dependent on realization events of the fund’s underlying investments.” Translation: These are fees Hamilton Lane collects based on markups that exist only on a spreadsheet, and which will only keep flowing if NAV keeps going up.

By simultaneously including this new metric and excluding stock-based compensation, the firm’s fee-related earnings grew by 37% year over year. Without it, growth would have actually been negative 16%.

In other words, more than 100% of the firm’s fee-related earnings growth came from technical adjustments, not any change to the fundamental value of the businesses it owns.

Troublingly, analysts, many of whom tell investors to buy Hamilton Lane’s stock, have priced Hamilton Lane as if this “new” revenue stream will grow smoothly for years. Goldman Sachs’ model, for instance, contemplates that after a blip in 2026 caused by a spike in redemptions, PAF’s value will appreciate at a steady 2.5% quarterly clip from March 2027 onward — roughly 10.4% compounded annually. You’ll be hard-pressed to find a 30-year window in private equity history in which quarterly marks were positive in every single quarter.

Hamilton Lane says “It’s important to note that we have a well-diversified business, providing solutions and services for a wide range of investors across the globe. If your calculation here was to simply remove FRPR, that would provide an inaccurate picture.” And in Hamilton Lane’s defense, many of its most aggressive practices have become the industry standard. But whether this means the practices are reasonable — or the private equity industry, on the whole, is more exposed in the event of redemptions than is widely understood — is the key question.

And Hamilton Lane’s practices are already starting to show some cracks. Funds that rely on day-one markups benefit from new money to buy more discounted assets, which creates more day-one markups, which keeps the reported performance high. But as the fund swells, the impact of new money — and, consequently, new day-one markups — is diluted, perhaps explaining why PAF’s performance has begun to sag.

Annual returns have compressed from 20.8% in fiscal 2022, when the fund managed $330 million, to 12.6% in fiscal 2025, when it managed $3.6 billion — a 10-fold increase in assets accompanied by a near-halving of returns. The since-inception figure of roughly 16% — which Hamilton Lane cited in its comment to Hunterbrook — is heavily weighted by those strong early years.

And, critically, Hamilton Lane hasn’t faced the pressure of forced liquidations. As of last year, money was still pouring into PAF: The fund reported about $146 million per month in average gross inflows during the first half of fiscal 2026, with $878 million in subscriptions against just $79 million in redemptions over that six-month period — an 11-to-1 ratio that is, by any standard, healthy. PAF today is not BREIT in December 2022. But that strength is also its primary vulnerability.

The entire model — the day-one markups, the FRPR, the reported IRR, the premium multiple the stock still commands — depends on a relentless stream of new money. Hamilton Lane’s next earnings report, scheduled for May 21, will give investors the first clean look at whether the ratio is holding. The math changes fast once it slows.

And the first sign that it may be slowing was revealed as this article was going to print. Public data from Hamilton Lane’s Global Private Assets Fund, or GPA — another flagship evergreen vehicle with $6.6 billion in assets — suggests that in March, the fund experienced an estimated net outflow of $172 million, its largest across the data Hunterbrook was able to review.4 It was only the second month of net outflows in the 18-month window for which data is publicly available — and it was nearly nine times larger than the first, a $19 million blip in September.

GPA is a different fund than PAF, but the dynamic is the same: The model depends on inflows exceeding redemptions. March suggests that equation may be starting to shift.

The Exit Doors

If there aren’t enough inflows to absorb the redemptions, then Hamilton Lane does have options—but none of them are good. They could use cash on hand to repay investors. They could add debt. They could tell investors they can’t have their money back, as multiple funds have done recently. Or they could start selling assets, thereby potentially triggering that vicious circle.

As Hamilton Lane itself warns in its fine print: “In a declining market, our evergreen vehicles may experience declines in value, and the pace of redemptions and consequent reduction in our assets under management could accelerate. Such declines in value may be both provoked and exacerbated by forced selling of assets, as further described below. Actions taken to meet substantial redemption requests could result in a material adverse effect on the fund’s investments, ability to make new investments or ability to achieve its investment objectives.”

And if Hamilton Lane starts seeing redemptions, it might take a long time to restore its brand.

“I don’t think memories are going to be short,” Dawn Fitzpatrick, the chief investment officer of Soros Fund Management, said in a recent interview about some of the practices she sees across the industry. “There’s going to be a culling of the alternative asset managers.”

Whether Pandora’s Box can be closed before the culling begins remains perhaps the industry’s most expensive question.

AUTHORS

Bethany McLean is the investigative journalist who exposed the notorious Enron fraud while a reporter at Fortune. She is a contributing editor at Vanity Fair who authored The Smartest Guys in the Room and several other books. She began her career as an investment banking analyst at Goldman Sachs before moving into journalism.

JD Jean-Jacques joined Hunterbrook from Goldman Sachs, where he worked as an investment banker. He was editor-in-chief of Howard University’s newspaper, The Hilltop, and wrote for The Exonian at Phillips Exeter Academy. Among other recognitions, he was a White House Correspondents’ Association scholar and was selected as student journalist of the year by The National Association of Black Journalists. He graduated from Howard with a B.A. in history.

Matthew Termine is a lawyer with nearly five years of experience leading the legal team at a mortgage technology company. In 2017, Matt was credited by the Wall Street Journal, among others, for identifying suspicious mortgage loan transactions that led to several successful criminal prosecutions, including that of a prominent political operative and the chief executive officer of a federally chartered bank. He is a graduate of Trinity College and Fordham University School of Law.

Editors

Jim Impoco is the award-winning former editor-in-chief of Newsweek who returned the publication to print in 2014. Before that, he was executive editor at Thomson Reuters Digital, Sunday Business Editor at The New York Times, and Assistant Managing Editor at Fortune. Jim, who started his journalism career as a Tokyo-based reporter for The Associated Press and U.S. News & World Report, has a Master’s in Chinese and Japanese History from the University of California at Berkeley.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please contact ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work opportunities, and press@hntrbrk.com for media inquiries.

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© 2026 by Hunterbrook Media LLC. When using this website, you acknowledge and accept that such usage is solely at your own discretion and risk. Hunterbrook Media LLC, along with any associated entities, shall not be held responsible for any direct or indirect damages resulting from the use of information provided in any Hunterbrook publications. It is crucial for you to conduct your own research and seek advice from qualified financial, legal, and tax professionals before making any investment decisions based on information obtained from Hunterbrook Media LLC. The content provided by Hunterbrook Media LLC does not constitute an offer to sell, nor a solicitation of an offer to purchase any securities. Furthermore, no securities shall be offered or sold in any jurisdiction where such activities would be contrary to the local securities laws.

Hunterbrook Media LLC is not a registered investment advisor in the United States or any other jurisdiction. We strive to ensure the accuracy and reliability of the information provided, drawing on sources believed to be trustworthy. Nevertheless, this information is provided “as is” without any guarantee of accuracy, timeliness, completeness, or usefulness for any particular purpose. Hunterbrook Media LLC does not guarantee the results obtained from the use of this information. All information presented are opinions based on our analyses and are subject to change without notice, and there is no commitment from Hunterbrook Media LLC to revise or update any information or opinions contained in any report or publication contained on this website. The above content, including all information and opinions presented, is intended solely for educational and information purposes only. Hunterbrook Media LLC authorizes the redistribution of these materials, in whole or in part, provided that such redistribution is for non-commercial, informational purposes only. Redistribution must include this notice and must not alter the materials. Any commercial use, alteration, or other forms of misuse of these materials are strictly prohibited without the express written approval of Hunterbrook Media LLC. Unauthorized use, alteration, or misuse of these materials may result in legal action to enforce our rights, including but not limited to seeking injunctive relief, damages, and any other remedies available under the law.

By: Sam Koppelman, Jenny Ahn, Matthew Termine, Alex Sternlicht, Michelle Cera

Editor: Jim Impoco

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, has no positions related to this article at the time of publication. Positions may change at any time. See full disclosures on our website.

Something doesn’t add up at Lennar ($LEN), America’s second-largest homebuilder.

The numbers are bad: Margins have cratered, cash flow has dwindled, and the stock has crashed.

But it isn’t just that the numbers are bad — it’s that they are surprisingly bad. For 10 straight quarters, Lennar’s stock fell the day after reporting earnings.1 Wall Street keeps modeling the company’s financials, and keeps getting it wrong.

So what is everybody missing?

Lennar itself raised this question in a statement released around noon yesterday that appeared random to observers of the name — framed as a response to “several analysts and investors” asking the company about its strategy. The contents of the press release were anodyne, but the stock fell to multiyear lows within hours.

“If you’re explaining, you’re losing,” wrote analysts at Evercore in a research note about $LEN.

What Lennar did not mention: Hunterbrook had repeatedly reached out to the company since last week with specific, detailed questions about its accounting and financials. Lennar — which in its statement claimed to be “deeply committed to engaging with investors, analysts, and all stakeholders — ghosted that outreach.

Hunterbrook wrote Lennar again after the statement on Monday. Lennar’s response: Nada. The only answers to Hunterbrook’s questions Lennar provided seemed to be selectively disclosed to analysts at banks, rather than the public. (The corporate equivalent of responding to rumors on your Close Friends story.)

Lennar’s narrative: Its numbers have been disappointing because of soft demand and aggressive discounting amid a widespread housing downturn. Lennar famously slashed home prices further than any peer, a bet on volume over margins that management framed as a deliberate strategy. The company reiterated that margin impact is largely a reflection of the volume-based strategy defended in yesterday’s statement.

But if Lennar’s strategy is working, why the carnage?

Specifically, why has Lennar consistently tripped over Wall Street’s gross margin projections every quarter since 2023? Is it really just the discounting?

To solve this mystery of the vanishing margins and immense cash burn, Hunterbrook Media analyzed proprietary national real estate data, hidden variables across SEC filings, and obscure documents from Lennar counterparties — including the pitch decks that Lennar’s financing partner, Angelo Gordon, presented to a California county pension fund.2 We also spoke with multiple independent accounting experts, investment analysts, a land banker, and investors who have combed through Lennar’s financials.

The evidence pointed Hunterbrook toward an explanation so buried in the books it seems that many of those covering Lennar missed it.

The homebuilder last year completed an ambitious transformation: moving 98% of its pre-construction land off its books and into third-party “land banks.” Executives projected this “land-light” strategy would cost just 1 percentage point of gross margin.

But Hunterbrook’s analysis indicates Lennar’s pivot to land banking has locked the company into paying Wall Street firms more than $2 billion a year in annual fees just to maintain options on land it used to own, according to Hunterbrook’s estimates. That figure now rivals the company’s entire net income.

These fees are generally paid monthly or accrued over time until Lennar takes delivery of the properties. Either way, most fees seemingly aren’t immediately showing up as expenses. Instead, Lennar appears to be capitalizing some of these disbursements — recording billions in accumulated spending as though it is an asset.

“It’s delaying the inevitable,” said JP Krahel, chair of Loyola University Maryland’s accounting department. “Seems a little nuts.”

The costs have already begun to creep into margins, though they appear to be masked by aggressive cuts to construction expenses. But the worst is likely still ahead for Lennar. The land bank portfolio has grown every year since 2020, and the average lot likely sits in the bank for roughly two years before Lennar takes delivery.3

That means the income statement today seemingly reflects only the earlier, smaller vintages of land bank deals.

The later vintages — carrying years of accumulated fees — haven’t hit yet. And Lennar’s sales pace suggests some of the land is sitting in the banks significantly longer than originally planned, silently accruing fees until Lennar takes delivery.

In the meantime, Lennar’s leadership appears to be heading for the exits. The co-CEO, general counsel, head of IR, and several other executives, including ones tied closely to land-banking, have recently departed.

“A number of long-term Lennar associates have chosen to retire … and let the next generation shine,” said CEO Stuart Miller, who has been dropping guarded hints about how expensive the land deals have been. The asset-light transformation, he told analysts on the most recent call, is “getting more interesting by the day.”

“Interesting” is likely not the word Lennar homeowners would use to describe what has happened to their homes during the company’s push to save money wherever it can. In 2025, Hunterbrook published an investigation into quality issues from Lennar and other homebuilders — ranging from severe mold infestations to cracked foundations to violations of building codes, according to interviews with 22 Lennar homeowners.

“It’s like they give you the impression that they’re rapidly building because they have such a high demand,” a Lennar homeowner who asked to be referred to only by her last name, Marks, told Hunterbrook. She said Lennar sold her a “lemon” home full of defects in 2024. “Then once you buy and move in, you realize nobody’s moving into those other homes.”

Those empty homes may be signs of a broken business model.

The industry affectionately called Lennar’s volume-based growth engine the “Lennar Machine.” But the machine has become a treadmill that Lennar no longer controls: The company appears to be churning out more and more homes from the option pipeline to stop the fees from accruing while the land sits in the bank. But in order to sell these homes in a weak housing market, Lennar is slashing effective prices, inclusive of incentives, destroying margins already buckling under the weight of the fees.

It’s a lose-lose for both Lennar and for the people like Marks surrounded by empty lots, watching their home values — and the stock price of the company that sold them the dream — plummet.

How’d Lennar get here?

The Big Bet

Lennar no longer owns the land it plans to build on — not until the moment it’s ready to start construction.

Over the past seven years, the company has executed on an extreme version of a big bet made by many major homebuilders — selling or transferring nearly all of the land it once owned to land developers or financial firms. In place of the land itself, Lennar contracted with these firms for options to purchase land. With remarkable speed, Lennar pulled off this “land light” strategy, going from owning roughly 75% of its land in the fourth quarter of 2018 to just 2% in the fourth quarter of 2025, with the rest controlled through options.

Optioning land allows homebuilders to free up massive amounts of capital that would otherwise be tied up with owned land. By keeping these properties in what is called a “land bank,” builders can secure a pipeline of land to buy when they need it, just in time for home construction. They don’t have to own all that land while they develop it or wait until the market is right.

Experts told Hunterbrook that the idea was to make Lennar’s balance sheet look more like that of NVR ($NVR), a smaller rival that Wall Street rewards with a higher multiple for keeping its books light. In March 2025, Miller told investors the land-light strategy would only carry a cost of roughly 100 basis points, or 1 percentage point, of margin — a small price to pay for a Wall Street makeover and attendant higher valuation.

But that’s not what happened.

Unlike NVR, which options land from local developers in a network that took decades to build, Lennar wanted a faster, more institutional setup. It turned to private equity firms like TPG’s Angelo Gordon and spun off its legacy land into a real estate investment trust (REIT) named Millrose Properties ($MRP). Miller called the company’s transition “a strategic national process,” though he later admitted, “We’ve put these things together pretty quickly.”

The main issue is that institutional land banks aren’t cheap. First, Lennar pays those firms deposits — about 5% to 20% of the land’s value — pretty standard for builders who option land from developers.

Second, what’s notable about the institutional land banks that Lennar borrows from is that they also charge option fees, which essentially amount to interest payments. To Millrose, Lennar pays an average of 8.5% annually. The number is likely higher for other counterparties like Angelo Gordon, which reported a 15% internal rate of return on its first Lennar land bank, according to a document obtained by Hunterbrook.

Contrast this with the NVR model Lennar seems to be emulating. NVR largely enters into land purchase contracts with developers for finished lots and pays a one-time deposit at roughly 10% of the land’s purchase price, which goes toward the principal. And the company doesn’t appear to pay recurring option fees. Which means, essentially, NVR’s cost to option land beyond interest is simply the impairment write-downs of the initial deposit if the builder decides not to purchase the land. In all of 2025, NVR paid $75.9 million total in impairments, nowhere near the amount Lennar may owe in fees.

Hunterbrook estimates those option fees will cost Lennar billions annually upon maturity, rivaling the company’s entire net income.4 The 1-percentage-point margin drag management promised appears to be way off.

Delaying the Inevitable

There seem to be two ways Lennar pays option fees. 1) With Millrose, Lennar pays in regular monthly installments — 8.5% on the value of the finished land. 2) With Angelo Gordon, the deals may be structured more like a PIK loan5 — with the option fees rolling into the purchase price when Lennar finally takes delivery of the lot, or when Lennar abandons the project, according to Angelo Gordon’s pitch decks, master agreement, and a video of Angelo Gordon’s presentation to a California county pension fund in 2024.6

It’s not clear precisely how these deals work, as the details surrounding them are largely kept private. But Hunterbrook’s reporting suggests this structure enables Lennar to pull off an accounting two-step.

During the period in which Lennar is paying out options fees, the company does not appear to expense them. Instead, Lennar seems to be parking these costs on the balance sheet under “deposits and pre-acquisition costs” until they purchase the lot — or take an impairment on it if they decide to walk — at which point these expenses eventually flow through to Lennar’s COGS.

This approach — which may be perfectly legal! — enables Lennar to present better earnings today, at the expense of worse COGS tomorrow.

Why do we think this?

One seemingly reasonable assumption is that if the deposit and pre-acquisition costs line really reflects money Lennar puts down to genuinely purchase land, then deposits would rise and fall roughly in step with the number of homesites Lennar controls. More land, more deposits and pre-acquisition costs. Less land, fewer deposits and pre-acquisition costs.

That’s how it works at NVR, the company Lennar reportedly models itself after. Its deposits track homesites almost perfectly. Over the course of 2025, NVR’s controlled homesites ranged from 155,000 to 169,250. Its deposit line moved roughly in lockstep: from $727 million to $851 million, holding steady at roughly $4,700 to $5,000 per homesite. No mystery.

At Lennar, the two numbers have decoupled.

Between February 2025 and February 2026 — the four quarters following the Millrose spinoff — Lennar’s controlled homesites fell by roughly 47,000, from 533,000 to 486,000. At Lennar’s average deposit and pre-acquisition costs — of roughly $12,900 per homesite as of November 2025 — that reduction theoretically should have pulled the deposit line down by approximately $600 million.

Instead, the deposit line grew by $1.6 billion — from $5.2 billion to $6.8 billion.

That’s a $2.2 billion gap between what the deposit line theoretically “should” have done and what it actually did. Even accounting for normal churn — Lennar continuously options new land to replace lots it takes down — a gap of that magnitude points to something other than new deposits driving the growth, likely a combination of capitalized option fees, infrastructure spending, and other pre-acquisition costs. (After all, the number of homesites are down!)

Now, there may be reasonable explanations for the gap.

Lennar develops the lots while they sit in the bank. Laying roads and utilities. Grading. Permitting and entitlements. These costs could add up quickly, depending on how raw the land was when Lennar optioned it.

That’s what Evercore offered as a possible explanation: infrastructure costs. In Texas, for instance, Municipal Utility Districts (MUDs) require builders to fund infrastructure upfront and later reimburse them through bond issuances; analysts at Evercore ISI, in the note published the same day as Lennar’s statement, estimated MUD spending alone accounts for over $300 million of the deposit line’s recent growth. (Lennar’s MUDs raise their own series of questions.)

But even Evercore’s own analysis said the “concerns around capitalized” options fees are “not without merit,” noting that Lennar’s non-Millrose land bank exposure is two to three times the size of its Millrose exposure and that the margin headwind could be well above the company’s 100-basis-point estimate. Evercore called on Lennar to provide more disclosure about what’s in the line — a request the company has so far declined to fulfill, though its next SEC filing, a 10-Q, which appears to be imminent, may offer answers.

And experts who spoke with Hunterbrook believe the most plausible primary source for the unexplained billions of dollars in this line item over the years is the capitalized option fees Lennar has been paying out to its land banking partners. Lennar’s management also confirmed to at least one investor — and seemingly the sell-side — that the deposit line includes option maintenance fees.

Krahel and other accountants interviewed by Hunterbrook questioned Lennar’s approach. “I don’t capitalize an electric bill because the second I stop paying it, the lights go out,” said Krahel, the chair of the accounting department at Loyola University Maryland.

He offered a second analogy: a pawn shop. If you pay $50 a month for a shop to hold your watch, those payments don’t reduce the ultimate price you pay. “Those monthly payments don’t offset the value of the gold watch when I come buy it back,” he said. “That’s rent expense. That’s really what this is.”

The issue, Krahel explained, is that the option fees Lennar is capitalizing aren’t actually an asset. They’re not paying down principal and reflecting the value of new land ownership. They’re just expenses, like interest. The money leaves Lennar and goes to other firms. Period. He described the accounting rules governing these kinds of transactions as “fundamental principles,” but it’s unclear whether Lennar is following them.

“Generally speaking, you cannot capitalize an expenditure if you’re spending it on something you don’t control,” Krahel explained. But if Lennar indeed does “control” the properties on which it is paying management fees, Krahel argued, then that land shouldn’t be off its books. “They’re trying to eat their cake and have it too,” Krahel said. “If they control it, it should be on their balance sheet.”

To be clear: Lennar’s accounting may be permissible. Under GAAP, payments to obtain an option on real property can be capitalized, and Lennar could argue that because the fees become part of the eventual lot purchase price, they are properly recorded as pre-acquisition costs. Reasonable accountants disagree on where the line falls — and Lennar said in its statement that its disclosures and accounting treatment “have been carefully vetted.”

But the financial consequences are the same regardless of how the fees are classified.

Whether Lennar records them as an asset today or an expense today, the cash has already left the building. And when the lots are finally taken down, the accumulated cost should hits the income statement either way. The accounting treatment determines when investors see the damage — not whether the damage exists. In the meantime, reported earnings look relatively intact, the balance sheet line keeps growing, and investors are left evaluating a company that appears to earn $2.1 billion a year but is quietly spending what appears to be a comparable amount to maintain its land pipeline.

Then, when Lennar takes down a lot from a land bank, the accumulated fees don’t get paid back. They become a cost, flowing straight into cost of goods sold and cutting directly into gross margins. And if Lennar abandons a lot, it takes an impairment instead.

“You’re feeding everybody on the pathway to the takedown moment thinking everything’s better than they are,” Krahel said. “And then — hello, surprise — here are expenses that were sitting on the balance sheet instead of having flowed through the income statement.”

The Inevitable: Cost Recognition

That “surprise” is no longer theoretical. Hunterbrook’s reporting indicates that it has started to bleed onto Lennar’s income statement as the first wave of optioned lots have been taken down — even if these fees were once marked as an asset.

It’s not immediately clear where these fees show up in Lennar’s earnings, because the company does not itemize them in its cost of goods sold (COGS).

But you can roughly back into the option fees as part of those COGS — and margin hit — through a few different, if imperfect, proxies.

One is through a comparison with D.R. Horton.

D.R. Horton, which targets very similar buyers at around the same price points, had comparable cost structures as Lennar from from 2020 to 2022. And both companies significantly cut down on their construction costs, which, in theory, should have reduced their COGS.

But starting in 2023, Lennar’s COGS as a share of revenue began pulling away, culminating in a roughly 2.8 percentage point gap in FY2025 — approximately $800 million to $1 billion in extra costs. That’s almost certainly a reflection of Lennar’s rising land costs, not construction costs (land and construction costs are the two most important homebuilding costs), because Lennar’s construction costs haven’t only been falling; they’ve been doing so at nearly twice the rate of D.R. Horton.7

This is, perhaps, an explanation for why Lennar appears to be among the only major homebuilders that actually almost lost money in the last 12 months.

And this may only be the beginning, because much of the fees Lennar has accumulated likely haven’t reached the income statement yet. The land-bank portfolio has grown every year since FY2020, with vintages growing over time — from 119,283 controlled homesites to 496,250 by FY2025. That means, assuming Lennar’s optioned land sits roughly two years in the bank before takedown, the income statement today reflects just the carrying costs on the earlier, smaller vintages. Meaning, the large tranches optioned in recent years — including over 100,000 homesites Lennar added to its portfolio last year alone — are still accruing fees in the background.

Based on this vintage approach, Hunterbrook estimates that last year, Lennar paid about $1.5 billion in option fees, or an average of roughly $20,000 per home sold.8 In an extremely simplified calculation, Hunterbrook assumed that the option rate on all the lots was 8.5%, the rate Millrose charges — almost certainly an underestimate given the higher market rates that Lennar likely paid to third-party lenders before Millrose was created in 2025. (This model also assumes Lennar has been taking down all homesites according to schedule; it doesn’t take into account a potential reality where Lennar’s takedowns have actually skewed toward the end of the term or renegotiated past the original term — events which would add to the accrued option fees.9)

If our analysis is right, as the portfolio matures and Lennar begins taking down lots with the full weight of accumulated carry costs, option costs as share of revenue will continue to climb. By FY2028, option costs on its portfolio could be roughly $2.5 billion or more, Hunterbrook estimates, potentially bringing down margins to a level barely enough to clear Lennar’s overhead. (Note: These truly are just estimates. The company provides very little information on this, so we backed into it. If you have a better way to calculate it, let us know at ideas@hntrbrk.com.)

The upshot is Lennar may end up taking a much bigger gross margin hit than the company telegraphed when it pivoted to the land-banking model — and Lennar’s margins are already much worse than peers.

In 2025, Lennar previewed just 100 basis points of margin as the cost of optioning land. That may have been true if you were just looking at the 2024 estimated takedown numbers, reflecting a little over half of Lennar’s current portfolio. Option fees net of the cost of owning land — using its corporate debt rate of around 5% as a proxy — would have gotten you close to that 100 bps spread. But by the time Lennar’s current portfolio matures, that spread will have increased to 300 bps, we estimate.

And while a few hundred basis points doesn’t sound like much — a small price to pay for the perks of a land-light strategy, an easily absorbable margin cost if you can keep your sales prices and volume pace healthy — that doesn’t tell the whole story.

The fundamental problem with Lennar’s new model is that slowing down has gotten much more expensive. When Lennar owned its land, the cost of delaying construction was roughly 5% interest. Now it’s at least 8.5% — and the land bank contracts don’t wait. Lennar seemingly had to renegotiate as much as $2.4 billion worth of options last year, and was “compelled to takedown” an additional $663 million from option land in 2025 — even as it sat on roughly 5,000 completed homes it couldn’t sell, a 72% increase from the year before.10 To move those homes, Lennar has needed to slash prices, squeezing margins already buckling under the option costs.

Stijn Van Nieuwerburgh — a real estate and finance professor at Columbia Business School — described the model to Hunterbrook as involving layered, and partly hidden, leverage. On the balance sheet, he argued, a “land-light” strategy can look less risky, but the economic exposure can end up resembling the older model that homebuilders such as Lennar are trying to move away from.

“It’s leverage on top of leverage,” Van Nieuwerburgh said. “In an upcycle, leverage helps you; in a downcycle, it can be devastating.”

“The optionality is supposed to reduce risk. But if the contracts embed enough financing and enough effective commitments, it can end up doing less risk reduction than advertised.”

But Lennar can renegotiate or walk, right? Isn’t that the point of the “land-light” model?

At least according to the terms Hunterbrook reviewed, there doesn’t seem to be a lot of wiggle room built into Lennar’s arrangement — although “flexibility” was supposed to be a key feature of the land-light structure.

Lennar’s portfolio with Millrose is based on a “cross-termination pooling” structure that keeps Lennar from being able to walk away from a bad community in one geography without triggering forfeitures across an entire pool of communities. Meaning, Lennar likely has to sit on optioned lots for a long time in markets where it makes little sense to start building — say in Florida, where home prices have dropped as much as 16% in some parts.

Angelo Gordon deals don’t look much more flexible for Lennar either.

According to Angelo Gordon’s pitch decks, the project cycle is limited to a 40-month period where Lennar has to takedown a certain number of lots each month on a rigid schedule. If Lennar falls behind that schedule, Angelo Gordon has the right to immediately terminate, keep the deposit, and sell the fully improved lots to a competing builder.

“There’s really no flexibility,” Angelo Gordon managing director Bryan Rush assured SBCERA, San Bernardino County employee’s pension fund, in 2024. SBCERA later approved a $150 million investment in Angelo Gordon’s land bank.

Angelo Gordon’s leash?

Angelo Gordon considers Lennar’s 19.9% upfront deposit — nearly twice the 10% Millrose charges — “first loss,” meaning Lennar’s deposit would take the first hit if deals go south. It’s another way Angelo Gordon seems to protect its downside, while leaving Lennar with the risks of forfeiting the entire deposit if projects stall, according to Angelo Gordon’s pitch to the pension fund.

And, presumably, those protections really matter for California. Because that state has seen what can happen when it doesn’t have them.

In January 2007, the massive state pension fund CalPERS invested roughly $970 million for a 62% financial interest in a Lennar land venture near Los Angeles.

Seventeen months later, the joint venture filed Chapter 11 bankruptcy. CalPERS lost its investment: $922 million, one of the worst single losses in the pension fund’s history.

Today, Angelo Gordon is channeling money from another California public pension fund, SBCERA, to fund the Lennar land acquisition.

But this time, in the event of a crisis, it seems like the role of bagholder would be reversed. It is Lennar, not the pension fund, that posted the first-loss deposit.

Asked how she would feel if Lennar had to take billions worth of impairments on its land bank investments, Marks — the resident who claims she was sold a “lemon” by Lennar — was blunt.

“Good,” she said, “lose money, like the rest of us homeowners.”

Authors

Jenny Ahn joined Hunterbrook after serving many years as a senior analyst in the US government. She is a seasoned geopolitical expert with a particular focus on the Asia-Pacific and has diverse overseas experience. She has an M.A. in International Affairs from Yale and a B.S. in International Relations from Stanford. Jenny is based in Virginia.

Matthew Termine is a lawyer with nearly five years of experience leading the legal team at a mortgage technology company. In 2017, Matt was credited by the Wall Street Journal, among others, for identifying suspicious mortgage loan transactions that led to several successful criminal prosecutions, including that of a prominent political operative and the chief executive officer of a federally chartered bank. He is a graduate of Trinity College and Fordham University School of Law.

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a B.A. in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

Alexandra Sternlicht is an award-winning journalist and Columbia Business School MBA candidate. She previously reported on technology at Fortune, where her investigations were cited by the U.S. Supreme Court, lawmakers and major media outlets. She’s also worked at Forbes and The New York Times. Alexandra is an alum of Columbia Journalism School’s Knight-Bagehot Fellowship and graduated magna cum laude from the University of Pennsylvania.

Michelle Cera trained as a sociologist specializing in digital ethnography and pedagogy. She completed her PhD in Sociology at New York University, building on her Bachelor of Arts degree with Highest Honors from the University of California, Berkeley. She has also served as a Workshop Coordinator at NYU’s Anthropology and Sociology Departments, fostering interdisciplinary collaboration and innovative research methodologies.

Editor

Jim Impoco is the award-winning former editor-in-chief of Newsweek who returned the publication to print in 2014. Before that, he was executive editor at Thomson Reuters Digital, Sunday Business Editor at The New York Times, and Assistant Managing Editor at Fortune. Jim, who started his journalism career as a Tokyo-based reporter for The Associated Press and U.S. News & World Report, has a master’s in Chinese and Japanese History from the University of California at Berkeley.

Graphic

Dan DeLorenzo is a creative director with 25 years reporting news through visuals. Since first joining a newsroom graphics department in 2001, he has built teams at Bloomberg News, Bridgewater Associates, and the United Nations, and published groundbreaking visual journalism at The Wall Street Journal, Associated Press, The New York Times, and Business Insider. A passion for the craft has landed him at the helm of newsroom teams, on the ground in humanitarian emergencies, and at the epicenter of the world’s largest hedge fund. He runs DGFX Studio, a creative agency serving top organizations in media, finance, and civil society with data visualization, cartography, and strategic visual intelligence. He moonlights as a professional sailor working toward a USCG captain’s license and is a certified Pilates instructor.

Hunterbrook Media publishes investigative and global reporting — with no ads or paywalls. When articles do not include Material Non-Public Information (MNPI), or “insider info,” they may be provided to our affiliate Hunterbrook Capital, an investment firm which may take financial positions based on our reporting. Subscribe here. Learn more here.

Please contact ideas@hntrbrk.com to share ideas, talent@hntrbrk.com for work opportunities, and press@hntrbrk.com for media inquiries.

LEGAL DISCLAIMER

© 2026 by Hunterbrook Media LLC. When using this website, you acknowledge and accept that such usage is solely at your own discretion and risk. Hunterbrook Media LLC, along with any associated entities, shall not be held responsible for any direct or indirect damages resulting from the use of information provided in any Hunterbrook publications. It is crucial for you to conduct your own research and seek advice from qualified financial, legal, and tax professionals before making any investment decisions based on information obtained from Hunterbrook Media LLC. The content provided by Hunterbrook Media LLC does not constitute an offer to sell, nor a solicitation of an offer to purchase any securities. Furthermore, no securities shall be offered or sold in any jurisdiction where such activities would be contrary to the local securities laws.

Hunterbrook Media LLC is not a registered investment advisor in the United States or any other jurisdiction. We strive to ensure the accuracy and reliability of the information provided, drawing on sources believed to be trustworthy. Nevertheless, this information is provided “as is” without any guarantee of accuracy, timeliness, completeness, or usefulness for any particular purpose. Hunterbrook Media LLC does not guarantee the results obtained from the use of this information. All information presented are opinions based on our analyses and are subject to change without notice, and there is no commitment from Hunterbrook Media LLC to revise or update any information or opinions contained in any report or publication contained on this website. The above content, including all information and opinions presented, is intended solely for educational and information purposes only. Hunterbrook Media LLC authorizes the redistribution of these materials, in whole or in part, provided that such redistribution is for non-commercial, informational purposes only. Redistribution must include this notice and must not alter the materials. Any commercial use, alteration, or other forms of misuse of these materials are strictly prohibited without the express written approval of Hunterbrook Media LLC. Unauthorized use, alteration, or misuse of these materials may result in legal action to enforce our rights, including but not limited to seeking injunctive relief, damages, and any other remedies available under the law.

By: Blake Spendley Carter Johnston

Editor: Sam Koppelman

Hunterbrook Media’s investment affiliate, Hunterbrook Capital, has no positions related to this article at the time of publication. Positions may change at any time. See full disclosures on our website.

Nine months before Iran reportedly began mining the Strait of Hormuz, a U.S. Navy director responsible for mine countermeasures delivered a candid assessment before an audience of international naval observers: The Navy’s next-generation mine-hunting systems suffered from unreliable unmanned vehicles, critical single-point failures, and sonar that couldn’t see.

Hunterbrook Media has obtained a copy of that briefing and its associated slides.

The picture they paint is harrowing. The U.S. stares down the barrel of a bleak scenario: a trio of flawed ships responsible for keeping open a global shipping artery that carries one-fifth of the world’s oil supply.

It wasn’t always this way.

In January, the U.S. Navy loaded four decommissioned Avenger-class minesweepers onto a heavy-lift cargo ship in Bahrain and sent them home for scrap. The wooden-hulled ships had spent the entire post-Cold War era keeping the Persian Gulf’s sea lanes clear — the only vessels in the American fleet at the time purpose-built to find and destroy naval mines. Their fledgling replacements — modern Independence-class Littoral Combat Ships appended with new unmanned mine countermeasures — had just arrived in theater. The transition was complete.

Two months later, Iran is reportedly laying mines in the Strait of Hormuz. For the United States, the artery is blocked.

And the U.S. Navy has three ships that haven’t been battle-tested standing between an Iranian minefield and the passage responsible for much of the world’s oil, fertilizer, and other critical products.

The current American mine countermeasures force positioned near the Persian Gulf is made up of Littoral Combat Ships the USS Canberra, USS Tulsa, and USS Santa Barbara. All three are Independence-class vessels — aluminum-hulled trimarans originally designed as multi-mission platforms, now carrying the Navy’s new Mine Countermeasures Mission (MCM) package in a largely fixed configuration. The modular concept that was supposed to be the LCS’s selling point — swap packages in, swap them out, reconfigure the ship for whatever the mission demands —has been quietly abandoned.

What each ship brings to a minefield: one MH-60S Seahawk helicopter carrying an airborne mine detection system using lasers and a mine neutralization system; two unmanned surface vehicles that can tow either the AN/AQS-20 side-scan and volume-search sonar or the unmanned influence sweep system; and the crew to run it all.

On paper, the package covers the full kill chain — find, classify, identify, neutralize.

The system reached initial operational capability in September 2022, but reportedly did not deploy on an actual ship until Canberra and Santa Barbara sailed in February 2025. Tulsa followed in May. Kansas City received its package that same month. The entire operational history of the LCS MCM mission package, from first deployment to today’s crisis, is measured in months.

For comparison, the ships they replaced had been doing this work for decades.

The Avenger class entered service in the 1980s. Their fiberglass-coated wooden hulls were designed specifically to reduce magnetic signatures — a basic requirement when you’re driving over mines that detonate based on what they sense passing above them. The LCS is a metal ship, and is significantly larger than an Avenger-class vessel, limiting how close it can safely operate in known or suspected minefields. In return, it sports a slightly more capable self-defense suite against surface and air threats, equipped with a 57 mm gun and a SeaRAM launcher. But it still needs escort protection during the slow, exposed work of sweeping and hunting. At the moment, as Reuters reported, the Navy has refused to provide escorts in the Gulf.

The Washington Institute estimated years ago that clearing the Strait of Hormuz of mines could require “up to 16 MCM vessels.” The Navy has seven. Iran has an estimated 5,000 to 6,000 mines and, according to U.S. intelligence in conversations with CNN, still retains “80% to 90% of its small boats and miners.”

The brief covered a recent MCM Advanced Tactical Training program, the final pre-deployment mine warfare assessment for LCS crews.

Some key findings:

Unreliable unmanned systems. Each Fleet-class USV mission requires over four hours of “pre-mission maintenance” and “1.5 hours of GPS/sonar calibration once launched,” according to the presentation. Multiple hunt missions were conducted where the sonar simply failed to record data — and crews didn’t know until the post-mission analysis. This is especially damaging during reacquire-and-identify missions, exactly the kind of work needed to clear a minefield.

Operators have responded by shortening mission times, which defeats the purpose of using unmanned vehicles in the first place. One pre-deployment exercise with the USS Tulsa off the coast of San Diego resulted in a runaway MCM USV near Mexico’s territorial waters that could not be recovered by the mothership LCS. “Literally, the practice minefield I use is 1 mile north of the US-Mexico maritime border, and there’s a good chance that that UUV drifts or decides to go off on its own. I’m going to get demarched by the Mexican government,” said the leader of the U.S. Navy’s Mine Countermeasures Technical Division. The USVs themselves act as a handicap to minesweeping, with a short bandwidth range forcing the mothership LCS to operate near or inside minefields to maintain visual range to the USV’s antennas.

Visual identification doesn’t work. U.S. MCM doctrine requires a camera to visually confirm mines — the AQS-20 has to drive directly over a bottom mine. But even the relatively clear waters off Southern California have defeated this approach. In the turbid, shallow, current-swept waters of the Persian Gulf, the problem would be far worse. The officer’s conclusion: The Navy needs to adopt high-granularity sonar identification, as other navies already have.

Critical single-point failures. The platform lift between mission bay and hangar, the BIT test laptops for the USV/ALMDS/AMNS, the twin boom extensible crane, and the payload handling systems are all single-point failures with no spares or redundancy aboard. If any one of these breaks, operations stop. When describing the deployment arm, the Navy mine countermeasures lead said, “It is a troubling system. It is highly complex for what it does, and when it breaks, I’m out of a job, I’m out of a mission.”

Multi-mission dilution. The LCS was designed as a multi-mission platform. The addition of Naval Strike Missiles and pressure to support visit, board, search, and seize operations means crews have less time to build and maintain MCM proficiency. “So now my ship with an LCS mission package may not necessarily be practicing MCM.” The LCS platform is also being experimented on as a long-range strike platform. The director’s own conclusion: The LCS will always struggle to match a dedicated MCM vessel.

Meanwhile, Hunterbrook sent a source Philadelphia to check out the old minesweepers — where the only war they are proximal enough to intervene in now is the cheesesteak rivalry between Pat’s and Geno’s.

The Pentagon declined to comment.

Authors

Blake Spendley joined Hunterbrook from the Center for Naval Analyses (CNA), where he led investigations as a Research Specialist for the Marine Corps and US Navy. He built and owns the leading open-source intelligence (OSINT) account on X/Twitter, called @OSINTTechnical (over 1 million followers), which also distributes Hunterbrook Media reporting. His OSINT research has been published in Bloomberg, the Wall Street Journal, and The Economist, among other top business outlets. He has a B.A. in Political Science from USC.

Carter Johnston is a second-year undergraduate student at George Washington University studying International Affairs and National Security. He is a freelance defense journalist covering the Air Force and Navy for The Air Current and Naval News since 2024.

Editor

Sam Koppelman is a New York Times best-selling author who has written books with former United States Attorney General Eric Holder and former United States Acting Solicitor General Neal Katyal. Sam has published in the New York Times, Washington Post, Boston Globe, Time Magazine, and other outlets — and occasionally volunteers on a fire speech for a good cause. He has a B.A. in Government from Harvard, where he was named a John Harvard Scholar and wrote op-eds like “Shut Down Harvard Football,” which he tells us were great for his social life.

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