by 1 last column explaining in narrative form the saga of FRG-B. Riley-Conn’s-Badcock-Buddy Mac-AF Newco/Phonix RBS
A common visual trope in procedural crime dramas, a genre I can’t get enough of, shows the homicide’s detectives clearing the pinboard and boxing up the evidence. This trope signals closure, that a suspect is in custody, and that a murderous virus has been removed from society. It serves as a re-set for viewers to return for the next thrilling episode.
This column is exactly that ritual of dismantling. It is a closing of the book on the operatically tragic demise of Franchise Group, the web of companies linked to it in various ways, and the thousands of jobs for hard-working Americans lost in cities and towns all over the South and Southwest.
This “homicide” took place in November 2024. Even before FRG’s bankruptcy became the scene of a crime, we set up the metaphorical pinboard with a column asking a simple but now haunting question: Why would FRG dump for pennies on the dollar a storied, 120-year-old brand like W.S. Badcock just two years after acquiring it for $580 million? Thus began an investigation that found a tangled web of “zombie” companies, predatory asset stripping, and a massive hedge fund fraud that eventually brought several retail giants to their knees.
At the center of this wreckage stands Brian Kahn, the former CEO of FRG who pleaded guilty to conspiracy to commit securities fraud this past December, and the engineer of a trophic cascade of ruin.
The Shadow of Prophecy
What we couldn’t know then was that the rot had begun years before the very public collapse through an investment scheme involving Prophecy Asset Management. In November 2023, Prophecy cofounder John Hughes admitted to defrauding investors of nearly $300 million. While Kahn initially denied any involvement, it later emerged that he was a primary sub-advisor who managed 86% of Prophecy’s funds. To hide losses that eventually totaled $350 million, Kahn and Hughes and possibly a third “co-conspirator” engaged in sham transactions and fabricated documents to inflate asset values, according to the complaint filed by the SEC. (The third possible co-conspirator, Jeffrey Spotts, is set to go on trial in May. He is pleading not guilty.)
One of the most brazen deceptions involved the creation of imaginary stock. Federal investigators charged Kahn with using backdated documents to show Prophecy as the owner of $125 million in preferred shares of Buddy’s Newco, an FRG subsidiary and the former franchisor of Buddy’s Home Furnishings. This stock was “invented” to serve as collateral for trading losses. The shares never existed, according to findings by federal investigators; the entire transaction was a sham designed to deceive auditors and investors. This deception provided Kahn with the motive, means and opportunity to continue his high-stakes financial maneuvers even as the ground shifted beneath him.
The Badcock Boondoggle
FRG acquired and then systematically stripped W.S. Badcock, a furniture chain founded in 1904 that had become a staple of the Southeast. Under Kahn’s leadership, FRG executed sale-leaseback transactions on all 35 company-owned retail locations and three distribution centers. This fire sale yielded approximately $244 million, or enough to pay off the initial acquisition financing, but it left the retail chain vulnerable.
By December 2023, with the Prophecy scandal looming and B. Riley Financial, the investment bank that enabled Kahn’s deals, refusing to absorb any more of Badcock’s customer receivables, Kahn needed an exit strategy. He orchestrated an all-stock deal to dump Badcock onto Conn’s HomePlus.
In exchange for a business it acquired for $580 million, FRG received 1 million non-voting preferred shares of Conn’s stock, which at the time were valued as low as $3 million.
The Take-Private Charade
While the Badcock deal was unraveling for FRG, Kahn led a $2.8 billion management buyout to take FRG private in August 2023. The move was financed heavily by B. Riley, now re-branded as BRC Group Holdings, which invested $281 million and provided hundreds of millions more in loans. Former FRG shareholders, including Kahn’s own Harvard football teammate, Brian Gale, later sued, claiming that the take-private move was a “charade” intended to avoid public company scrutiny of Kahn’s fraudulent transactions and the missing Prophecy funds.
During these negotiations, according to the charges to which Kahn pleaded guilty, Kahn made false representations to B. Riley and auditors, failing to disclose that he was already a target of a federal grand jury investigation regarding the Prophecy fraud. B. Riley’s CEO, Bryant Riley, who had known Kahn for decades, initially expressed unwavering faith in Kahn, a statement he later said he regretted as his own firm’s stock price plummeted by over 80%.
Lives and Companies Ruined
In procedural crime dramas, the homicide is the end only for the victim. For everyone else, it is the beginning, including for the investigators and for the friends, family and concentric social circles of those known by the victim. The human cost of FRG’s maneuvers began to manifest in the summer of 2024. Conn’s, having inherited the sinking ship of Badcock, filed for Chapter 11 bankruptcy in July. Conn’s and Badcock locations totaling 550 stores were shuttered across 15 states.
For the people of Mulberry, Florida, where Badcock was founded 120 years ago, the liquidation was described as “one of the worst days” in the town’s history, signaling the end of a family-owned legacy that had survived the Great Depression.
In November 2024, Franchise Group itself filed for bankruptcy, reporting nearly $2 billion in debt. As part of the restructuring, American Freight, a 357-store furniture chain, immediately shut down, leaving approximately 3,000 employees without jobs. Between Conn’s, Badcock and American Freight, nearly 7,000 retail workers saw their livelihoods vanish in a matter of months.
The destruction extended to individual entrepreneurs, which is to say the many franchisees. Buddy Mac Holdings, once “franchisee of the year” for Buddy’s Home Furnishings with 84 stores, was forced into its own bankruptcy. Owner Ian Macdonald declared that the financial distress of FRG made it impossible to secure credit from suppliers, leading to “vicious cycles” of inventory shortages and plummeting sales. Other Buddy’s franchise groups such as Pentex and BeBe Stores filed “incurable” default claims, alleging that FRG management had violated their noncompete agreements and marketing territories.
The Aftermath
The legal fallout has been extensive. On Dec. 10, 2025, Kahn finally stood in a federal courtroom in Trenton, New Jersey, and pleaded guilty to conspiracy to commit securities fraud. He faces up to five years in prison for his role in the Prophecy scheme. In a final irony, despite selling his Florida home for $11 million just a week before his court appearance, Kahn claimed he was “financially unable to employ counsel” and requested a court-appointed attorney.
Kahn’s long-time partner, B. Riley Financial, also turned on him. In January this year, the firm filed a $735 million lawsuit against Kahn, his wife and the law firm Willkie Farr & Gallagher, claiming that BRF was the victim of the massive fraud scheme. BRF claims that Kahn’s deceptions led them to write off nearly half a billion dollars in loans and investments, nearly destroying the 27-year-old boutique bank in the process.
No Hero in Sight
So, as we un-pin the mugshots and red string, there is no hero to be found. FRG lenders focused on selling off pieces like The Vitamin Shoppe and Pet Supplies Plus to recoup their losses. These lenders showed incredible naiveté throughout the bankruptcy proceedings, in my opinion, and few of their sell-off decisions made any sense, including the latest and presumably last, the sale of Buddy’s to RTO industry outsiders.
And while the global settlement reached in May 2025 provided some relief for creditors, it did nothing to bring back the thousands of jobs or the 120-year-old communities affected, nor could it restore trust in furniture companies by ordinary consumers.
The pinboard of evidence is now complete, revealing a story of what can only be called unconscionable greed. Corporate assets were seemingly treated as paper to be shuffled and pledged until the debt became unsustainable. Deals were orchestrated to prioritize liquidity and to conceal fraud rather than to build the businesses involved. In the end, the lifeboat that was supposed to be Badcock, too, got pulled down to a watery grave.
Rising out of FRG’s ashes is perhaps one of the more unlikely of corporate entities. This phoenix is Phonix RBS and its parent, AF Newco, that re-unites several of Kahn’s past associates, American First Finance, and even Kahn himself. Initially acquiring out of bankruptcy 33 American Freight stores and AF intellectual property for just $3 million, AF Newco-Phonix then went after what was left of Buddy Mac, fast-tracking that chain’s bankruptcy by calling in a loan note just a day or so after acquiring it.
Were all of this to be made into a movie, it’s difficult to guess which genre would make the most sense. A financial thriller? A zombie flick, given all of the “zombie” holdcos and shell companies? A vampire movie?
If we could convince Jordan Peele to take the script, maybe all three genres could be puréed into one darkly comic epic: Titanic meets Wolf of Wall Street meets the Walking Dead. It’s not a film I want to watch. This investigator is re-setting, moving on, eager to forget the whole thing.
(Pan back to helicopter or drone shot of the city’s nightscape glittering below like diamonds in the rough.)
