Feds Investigating John Ruiz's Record-Breaking LifeWallet SPAC Deal

Last year, University of Miami sports benefactor John Ruiz took his business MSP Recovery public with a $32 billion valuation in the largest-ever reverse merger of its kind in the U.S.

Ruiz's predictions about the company's growth and future revenue left some stock market observers speechless, though Ruiz was eyeing an even bigger valuation of $50 billion. Stanford Law professor Michael Klausner likened MSP to a flying car company and said that given the firm's revenue figures, the lofty valuation was in a "class by itself."

Now it appears the May 2022 transaction grabbed the attention not only of analysts and investors but federal regulators as well.

In a recent filing, MSP Recovery, now known as LifeWallet, says the U.S. Securities and Exchange Commission opened an investigation last August into the record-breaking deal, which involved a so-called special-purpose-acquisition-company (SPAC) merger with Lionheart Acquisition Corporation II.

"The company received a subpoena dated March 1, 2023 from the SEC regarding the aforementioned subject matter, and subsequently received a subpoena on May 10, 2023 requesting documents in connection with the company's financial statements for the periods ended June 30, 2022 and September 30, 2022," the 8-k filing reads.

LifeWallet also revealed that it had received a subpoena from the U.S. Attorney's Office related to a federal grand jury investigation in the Southern District of Florida.

In response to New Times' request for comment, the company pointed to the public statement in the filing, which says LifeWallet is confident the investigations "will be resolved without any material developments."

"To the best of the company's knowledge, the Department of Justice has not issued any target letters to anyone associated with the company as a result of this investigation," the filing reads.

As noted in the filing, LifeWallet recently warned shareholders in April that its 2022 financial statements were no longer reliable as a result of accounting errors. LifeWallet admitted that the reporting periods — the ones apparently cited by the SEC — were "materially misstated" and that the company was taking steps to bring its accounting process up to snuff.

The company's Chief Financial Officer Calvin Hamstra resigned from his position in June and was replaced by Chief Operating Officer Ricardo Rivera.

LifeWallet's acknowledgment of the federal probes comes on the heels of a Miami Herald report that noted the company was under investigation by federal agencies.

Ruiz made a name for himself in Miami as a prominent litigator and host of the show "La Ley" on Spanish-language television. In 2021, he bought the storied local outfit Cigarette Racing, in keeping with his penchant for zipping across Miami-area waters in speedboats. His luxury expenditures, including a custom private jet, and property acquisitions have come under scrutiny in light of LifeWallet's financial struggles.

The MSP Recovery deal, which was considered the largest ever U.S. SPAC merger as measured by enterprise value, propelled Ruiz into the national spotlight and untold wealth. Ruiz went on to pour money into his alma mater, University of Miami, reportedly investing $14 million in name-image-likeness (NIL) deals for 165 athletes, including Kansas State transfer Nijel Pack, who landed a two-year $800,000 NIL deal with the company.

LifeWallet is in the business of large-scale collections on medical claims. Ruiz markets it as a firm that uses specialized technology to identify collection opportunities on behalf of Medicare and other parties who covered patient medical bills that should have been shouldered by auto insurers or other payers.

The company's shareholders have been pummeled over the last year and a half, as its share value collapsed almost immediately after going public. Its stock dropped more than 90 percent from the SPAC's $10 share price in short order, and is now trading at 18 cents a share as of the evening of August 3.

In 2022, the firm raked in a tiny fraction of its $992 million annual revenue projection. Following a year of financial woes, it rebranded as LifeWallet while promoting a series of new health technology features.

Still, the company's fate has yet to make the turnaround Ruiz and shareholders were hoping to see.

In April, LifeWallet was dropped as the claims agent in a class action against Florida Power and Light (FPL) over prolonged power outages following Hurricane Irma in 2017. In one motion, FPL pointed to LifeWallet's recent SEC filings to argue the company "is in serious financial trouble" and "may not survive the duration of this lawsuit."

LifeWallet has also faced delisting from the NASDAQ exchange due to its stock lingering below $1 for 30 consecutive business days. (The company maintains it submitted a compliance plan to meet NASDAQ listing requirements.)

A recent press release maintains that the company is "seeing strong demand for [its] expertise and recovery services from health plans, providers, and self-insured entities." The release notes that LifeWallet's annual filing corrected the past accounting errors, and that the company has renegotiated payment schedules with debt holders.

"The company continues its strategy, daily operations, and mission to disrupt the antiquated healthcare reimbursement system with data-driven solutions for consumers and industries," the release states.

Often referred to as blank-check companies, SPACs like Ruiz's vehicle Lionheart Acquisition raise money from investors (typically institutional players) to acquire a private company for the purpose of taking the venture public. While advocates claim SPAC deals provide a means for early-stage companies to swiftly go public, critics have warned they shortcut the traditional public offering process and have the propensity to generate big profits for institutional investors and sponsors while less sophisticated, retail investors suffer losses after the post-merger decline.

LifeWallet says although it "has cooperated, and will continue to cooperate fully" with the federal probes, "there can be no assurance as to the outcome."