Citing a lack of cash, the trustee managing Flipcause’s bankruptcy has asked the court to change the status from a Chapter 11 bankruptcy to a Chapter 7.
“The Debtor’s estate has no operations or ability to collect revenue,” Trustee Jeffrey Testa stated in a court filing, and “each dollar expended… is not being replaced.”
Chapter 11 bankruptcy provides for reorganizing a business. Chapter 7 typically signals an end to the business. In March, the trustee sold or abandoned the donation platform’s assets to raise money to pay back creditors.
Flipcause filed for Chapter 11 bankruptcy in December, revealing the company owed $30 million to creditors, including nearly $29 million to nonprofit organizations nationwide.
A judge appointed Testa in January following concerns of alleged mismanagement, according to court filings.
Software4Nonprofits purchased Flipcause in March for $400,000, or about 3% of the $15 million Flipcause’s co-founder Emerson Ravyn said a sale would bring. Although the nonprofits that used Flipcause’s donation platform to raise money are owed $30 million, the bankruptcy filing lists them as “unsecured creditors.”
Nonprofits will only be paid after claims from administrative professionals, bankruptcy lawyers, and investors are settled. Testa estimates those claims could range from $2,495,000 to $3,595,000, including at least $750,000 for court-appointed attorneys.
Investor reaches settlement with Flipcause estate
According to Flipcause’s bankruptcy filing, the platform owes $600,000 to Grand Avenue Investments, LP. Grand Avenue claims Flipcause owes the private equity firm at least $1.2 million.
Grand Avenue has agreed to limit its secured claim to $825,000. Grand Avenue would immediately receive $250,000. The remaining balance of $575,000 would be repaid through revenue sharing from Software4nonprofits subscriptions.
If the balance isn’t paid off within six months, Grand Avenue waives the rest of its claim.
Grand Avenue also agreed that that remaining $375,000 owed would be an unsecured claim that would be due after charities are repaid.
In January, the company sued Ravyn in New York’s Supreme Court. Grand Avenue also agreed to assign its rights to personally sue former Flipcause Ravyn to the estate.
The estate and Grand Avenue agreed to a “Carve Out Reserve.” These funds would pay people running the bankruptcy, including $400,000 for Chapter 11 estate professionals and $300,000 for the new Chapter 7 trustee. The new trustee would investigate and take legal action to claw back money for creditors, according to filings.
Testa previously stated he planned to first pursue a sale and then investigate funds that went out before bankruptcy.
Flipcause executives paid themselves $3.8 million prior to filing for bankruptcy.
Trustee reaches settlement with payment processor
Testa also reached a settlement with payment processor Stripe, Inc., which froze Flipcause’s funds in Dec. 2025 after the platform’s leadership signalled it would not comply with a cease and desist order by the California Attorney General’s Office.
Mastercard had penalized Stripe for chargebacks after nonprofits complained that Flipcause was not remitting donations.
Flipcause attempted to compel Stripe to release the frozen funds, but Stripe, Grand Avenue, and the attorney general all objected.
The Stripe settlement would immediately provide the estate about $550,000. Stripe agreed that any of its unsecured claims would follow repayments to nonprofits.
Nonprofit objects to settlement
Some nonprofits have objected to the settlements. Kentucky-based Americana Community Center, owed $50,000, argued in a filing donations that went through Flipcause weren’t “payments for services rendered,” but entirely “charitable donations made by third-party donors to Americana through its SOS Campaign, which was conducted to sustain Americana’s operations and keep its doors open,” Executive Director Richard Santiago wrote to the court.
“The continued withholding of these funds prevents Americana from fulfilling its obligations and undermines public confidence in charitable giving,” Santiago wrote. Separately, attorneys representing dozens of charitable organizations as part of a proposed class action lawsuit filed a limited objection. The attorneys asked the court to require an accounting of the funds held by Stripe, since some of the donor funds may have come from individual donors and were intended for nonprofits, not the Flipcause estate.
Final Chapter 11 hearing?
A hearing is scheduled for Apr. 28 on conversion, settlements, and claims.
Be the first to comment