Investigating Inspired Healthcare Capital: The M. Benjamin Jones Declaration
On February 2, 2026, Inspired Healthcare Capital (IHC) and 160 affiliated entities filed for Chapter 11 bankruptcy protection in the Northern District of Texas. For the thousands of investors who funneled over $1.2 billion into IHC’s Delaware Statutory Trusts (DSTs) and private investment funds, this filing confirms what many have feared since distributions were abruptly halted in mid-2025: a systemic collapse of the IHC business model.
As a securities attorney, I was very interested to read the Declaration of M. Benjamin Jones, IHC’s Chief Restructuring Officer (CRO), which was filed in support of the bankruptcy. This document provides a startling look into allegations of mismanagement, the use of “Ponzi-like” cash movements to sustain investor distributions, and the misappropriation of millions in investor capital for luxury personal expenses.
If you are a DST or Fund Investor, here is a summary of the critical revelations from the CRO’s declaration and what they may mean for your recovery options.
1. The Magnitude of the Collapse
IHC’s operations were vast, spanning 33 operating senior-living facilities across 14 states, housing approximately 2,620 residents. To fuel this growth, IHC utilized two primary fundraising channels:
- DST Offerings: Targeted at investors seeking Section 1031 Tax Exchanges, raising significant capital from roughly 2,300 investors.
- Investment Funds: Ten different funds that raised over $390 million from more than 3,300 investors through the sale of promissory notes and equity securities.
The declaration reveals that while the portfolio may have appeared robust to mom-and-pop investors, the underlying financials were often hollow.
2. Artificial Distributions and “Cash Subsidies”
One of the most troubling admissions in the declaration is that IHC was often using new capital to pay old obligations. Jones states that “many Communities never generated sufficient net operating income to pay all obligations.”
Of the 31 DST Communities, only 8 operated without a direct cash subsidy from the company. To maintain the appearance of performance and keep distributions flowing to investors, IHC’s former management allegedly moved money between businesses. This included using funds from the Investment Funds to support underperforming DSTs. This circular flow of cash is a hallmark of troubled investment schemes and often serves to mask insolvency from investors and regulators alike.
3. Allegations of Mismanagement and Misappropriation
Perhaps the most damaging portion of the declaration for IHC’s former leadership concerns the use of company funds for personal gain. Jones notes that a preliminary analysis suggests investor funds were not always used for their intended purposes.
Specifically, the declaration alleges that former management used company money to acquire:
- Luxury vehicles and a condo in Las Vegas.
- Real estate titled in the name of a non-debtor company owned by former CEO Luke Lee and his wife.
- Significant non-business expenses and personal purchases.
These expenditures were reportedly recorded on the company’s own books, yet investors were left in the dark as their distributions were suspended in June 2025.
4. The Role of Broker-Dealers
For many investors, the entry point into IHC was through a financial advisor or broker-dealer. The declaration highlights that IHC was “heavily reliant” on these intermediaries, who profited handsomely from the relationship.
According to the filing, broker-dealers received more than $100 million in commissions and fees for raising capital for IHC. Emerson Equity, LLC is specifically identified as the managing broker-dealer for 29 of the DSTs and all of the Investment Funds. Under FINRA rules, broker-dealers have a rigorous duty to conduct due diligence on the products they sell. The fact that IHC was allegedly using intercompany “subsidies” to pay distributions as early as 2020 raises serious questions about whether these firms met their regulatory obligations to investors.
5. Current State of the Bankruptcy
Since the SEC initiated a formal investigation in April 2025, IHC has undergone a complete governance overhaul. Independent managers have been appointed to secure books and records, and M. Benjamin Jones was brought in as CRO to navigate the Chapter 11 process.
The company currently faces:
- $260 million in secured third-party debt.
- $165.8 million in total unsecured liabilities, including $148 million in unsecured investor promissory notes.
- Multiple lawsuits, receivership actions, and foreclosures across several states.
The stated goals of the bankruptcy are to maintain resident care, centralize litigation, and pursue a sale process to maximize value. However, in many healthcare bankruptcies of this nature, the recovery for unsecured investors can be cents on the dollar.
What Should IHC Investors Do?
If you invested in an IHC DST or one of their private funds (such as the Income Funds or Development Funds), the bankruptcy filing is a “stay” on your ability to sue the company directly, but it does not stop you from pursuing claims against the broker-dealers and financial advisors who recommended these investments.
Many investors were told these were “safe,” “income-producing” real estate holdings. The CRO’s declaration suggests the reality was a liquidity-constrained enterprise propped up by misappropriated funds and internal subsidies.
Our firm is currently investigating potential claims for:
- Unsuitable Recommendations: Did your advisor ignore your risk tolerance?
- Failure to Conduct Due Diligence: Did the broker-dealer miss the “red flags” regarding IHC’s internal cash movements?
- Misrepresentations and Omissions: Were you told the truth about the source of your distributions?
The window to recover losses through FINRA arbitration or civil litigation may be limited. If you invested in Inspired Healthcare Capital, it is imperative that you have your investment documents reviewed by experienced securities counsel.