John Ruiz's LifeWallet Defers Debt Payments, Warns of Accounting Blunders

High-profile attorney and 'Canes benefactor John Ruiz's company LifeWallet missed another deadline to file its annual financial report and is telling investors that accounting blunders have made its previous financial statements unreliable.

LifeWallet, which markets itself as a leader in the medical claims recovery business, revealed in an April 14 filing that it had identified "material weaknesses in internal controls" in its accounting. The resulting errors were significant enough that the company told investors they could no longer rely on its financial statements ranging from June 30, 2022, to September 30, 2022.

In light of the announcement, investors and analysts are left wondering what surprises await when the company releases its annual report, which has been delayed for the last two weeks. LifeWallet put in a late filing notice on March 31, which gave it an additional 15 days to file the annual report.

On Sunday, April 16, the company "determined that it would not be able to file within the additional time afforded."

As of its last quarterly filing, the company had not earned anywhere near the amount it had projected it would make. LifeWallet reported that over the nine months ending September 30, 2022, it raked in $21.79 million, a small fraction of the nearly billion-dollar revenue it had anticipated for the year. The company conceded in November that it would not meet its $992 million revenue projection in 2022.

The company's primary business revolves around collecting on injured-patient medical claims whose costs allegedly should have been paid by auto insurers or primary insurers but were instead shouldered by Medicare Advantage plans, other insurers, or private healthcare providers.

The business was born from Ruiz's success as an insurance and class action attorney. While the company has touted its appellate court case victories as substantiating its business model, those wins have not yet translated into the lofty revenue intimated in some of the company's press releases.

Ruiz and LifeWallet appeared to be in damage control mode over the weekend.

LifeWallet said that "it is an emerging growth company, and one of the key areas of development has been investment in its financial and reporting teams and controls."

"The company has made significant progress related to the development of internal controls and has expanded its financial and reporting team with members that have public company reporting experience," the company said Sunday.

In the same statement, the company announced it had renegotiated payment obligations to its investment partner Virage Capital Management and its debt to Nomura Securities, which provided underwriting and banking services to help take the company public last year.

Nomura agreed to defer the upcoming May 29 payment date for LifeWallet's $24.5 million debt for those services. Under the parties' new deal, inked April 12, LifeWallet owes Nomura $26.3 million, now due in full on September 30, 2024.

The payment deadline for debt to Virage was extended to that same date, and in the meantime, Virage will have the right to monitor LifeWallet's bank accounts to keep track of its financial status. LifeWallet has different pathways to repay Virage, but if revenue is inadequate, Virage has broad rights to payment in LifeWallet stock with anti-dilution protections. If all else fails, Ruiz and his partner's stock will be liquidated to satisfy the payment obligations, according to an SEC filing.

"Virage Capital Management LP continues to support LifeWallet's vision, business plan, and execution," said Edward Ondarza, founder and managing director of Virage. "Virage fully understands litigation may be delayed and is confident in LifeWallet's ongoing recovery efforts."

Ruiz maintained the accounting snafus did not affect LifeWallet's cash position.

Before going public, LifeWallet, then known as MSP Recovery, Ruiz and his associates claimed its asserted $32.6 billion valuation was reasonable given that the company was digging into a lucrative and largely untapped well of recoverable insurance proceeds. The market evidently did not agree, and the stock lost the vast majority of its value within a week of opening trades on the Nasdaq in May 2022.

The company went public through a reverse merger with a special purpose acquisition company (SPAC) known as Lionheart Acquisition Corporation II.

In the midst of the bedlam, a June 2022 Washington Post article noted that Ruiz and his partner owned more than 90 percent of the shares, meaning the evisceration of tens of billions of dollars in valuation was concentrated in their holdings.

Still, some outside stockholders and retail investors — as well as third-party companies that agreed to accept payments in LifeWallet stock — faced significant losses as the stock continued to flounder. 

When Starwood Capital founder Barry Sternlicht resigned from Miami-based senior healthcare provider Cano Health's board in late March, he skewered Cano management for alleged poor decision-making, citing deals under which the company assigned claims to LifeWallet and agreed to accept LifeWallet stock as payment.

LifeWallet rebranded under its current name in late 2022, saying it would offer new services and shore up its revenue stream with software products to optimize clients' claims recovery.

Ruiz and the company have been major players in the burgeoning collegiate athlete marketing sphere.

Among other big-name sponsorships, LifeWallet last year listed name-image-and-likeness (NIL) deals with University of Miami Hurricanes basketball ace Nijel Pack and stars Hanna and Haley Cavinder, who have since announced they're parting ways with the 'Canes.