SECOND COMPANY CLAIMS IN FEDERAL COURT FILINGS THAT ADDICTION RECOVERY CARE SOLD DISPUTED TAX RECEIVABLES TWICE
JANUARY 30, 2026 – written by WADE QUEEN
The above legal screws are keeping the deepening legal hole growing underneath for the failing Louisa, Kentucky medical addiction company as it falls further in oblivion financially.
A federal judge in Manhattan has now tightened the freeze on the bulk of Addiction Recovery Care’s cash, following a contempt hearing on Thursday in New York City.
The dispute centers on Angelica Capital Trust advancing $5.4 million to ARC in November 2025, with the agreement that ARC would turn over an $8.1 million in tax refunds from Employee Retention Credits as repayment. However, Angelica Capital Trust says ARC kept and spent the money instead, defaulting on the loan.
ARC has not disputed that it owes the money.
Angelica Capital Trust claims ARC is on the verge of financial collapse as it scrambles to come up with $27.7 million to settle a U.S. Department of Justice investigation into the company for Medicaid and Medicare fraud.
On Tuesday, January 13, U.S. District Judge George Benjamin Daniels issued a temporary restraining order prohibiting ARC from allowing its bank account to dip below $10 million. However, after that order, ARC transferred money out of its account to its subsidiaries, resulting in Angelica Capital Trust filing an amended petition for an injunction, adding the subsidiaries to the action.
ARC responded that it was impossible to comply with the judge’s order, as the company had less than $10 million in its account when the order was issued. ARC also produced bank records showing the company had just $5.7 million as of Monday, January 19.
On Thursday January 22, Judge George Daniels granted a preliminary injunction segregating $4.7 million, representing the bulk of ARC’s stated cash balance, into a frozen account,while Judge Daniels allowed the company to keep $1 million to cover daily expenses that were expected to last until the expected sale of the company February 4.
But on Sunday, January 25, Angelica Capital Trust attorney Anthony Candido wrote a letter to Judge George Daniels alleging another violation of the judge’s orders.
“Respondents [ARC] transferred or spent $2.1 million from their accounts within two days after the hearing (and may have transferred more since),” Anthony Candido wrote. “This is the second time respondents have violated Your Honor’s orders and we are deeply concerned they will continue to do so.”
In a memorandum opposing a finding of contempt filed Wednesday, ARC responded that it has made every effort to comply with the judge’s order. But the company claims between Monday, January 19, when the company provided a snapshot of its account balance to the court, and Thursday, January 22, when the injunction was granted, $1.35 million was automatically deducted from the account for payroll, and nearly $1.4 million more in “critical operating expenses” such as utilities, food and medicine also had to be paid. However, ARC said it convinced the intended buyer of the company; identified in the court filings as California-based Emend Healthcare, according to Anthony Candido’s letter; to advance $1.3 million of the purchase price to bring the frozen account back up to $4.7 million.
On Thursday, Judge George Daniels issued an order not only reiterating that ARC is not to transfer any money from the segregated account, but also ordering the bank, Truist, not to allow any transfers without a court order while the case remains pending. Judge Daniels also ordered ARC to provide Angelica Capital Trust’s attorneys with the account balance each business day, “to ensure the funds have not been dissipated.”
Judge George Daniels has not issued any orders regarding a request from ARC’s attorneys to withdraw from the case, saying they had become aware ARC was “insistent upon taking actions with which we have a fundamental disagreement,” and had “failed to cooperate in the representation and rendered the representation unreasonably difficult.”
Judge George Daniels also has not taken action on a motion from a second company, Clear Cove Opportunities Fund I, to intervene in the case, alleging ARC sold them the same tax credits that the company had sold to Angelica Capital Trust.
Attached below are downloadable links of Anthony Candido’s letter, an email attachment accompanying his letter, ARC’s opposition to a contempt finding, and Judge George Daniels’ order for ARC and Truist not to cause any money to be transferred from the segregated account.
arc-angelica-letter-violation-complaintDownload
arc-angelica-letter-attachment-email-bankDownload
arc-opposition-contemptDownload
arc-2nd-order-freezing-accountDownload
SECOND COMPANY CLAIMS ARC SOLD DISPUTED TAX RECEIVABLES TWICE
The second investor fund group entered the growing legal fight over Addiction Recovery Care’s finances earlier this week, asking the federal judge in the New York City based case against ARC to block the release of millions of dollars currently frozen by the court.
Clear Cove Opportunities Fund I has filed a motion seeking permission to intervene in the ongoing case between Angelica Capital Trust and Addiction Recovery Care, or ARC. Clear Cove claims it already owns the rights to federal tax refunds at the center of the dispute and says those funds should not be released until ownership is sorted out.
According to court filings, Clear Cove says it purchased ARC’s rights to employee retention tax credit refunds for the first quarter of 2021 in July 2025, paying more than $3.3 million. Two months later, Clear Cove says ARC also granted it a backup claim on second-quarter 2021 tax refunds if the first refund was delayed.
Clear Cove says the Internal Revenue Service paid both refunds in early December, but ARC never turned the money over. Instead, ARC later entered into a separate deal with Angelica Capital Trust, which also claims rights to the same refunds.
Angelica sued ARC in federal court earlier this month, accusing the company of defaulting on its obligations and improperly holding onto the tax money. A judge has since ordered ARC to place about $4.7 million into a frozen account while the dispute plays out.
Clear Cove now argues that at least part of that frozen money belongs to it, not Angelica or ARC. The firm says ARC had already sold the refund rights to Clear Cove before entering into any agreement with Angelica and that Clear Cove’s ownership interest was publicly recorded through state filings.
“Clear Cove recently learned that, after ARC sold the Transferred Interests and granted the Secondary ERC Claim to Clear Cove, ARC then purported to sell Clear Cove’s property; i.e., the very same ERC refunds comprising the Transferred Interests and Secondary ERC Claim; to Petitioner Angelica Capital Trust,” Clear Cove says in a motion to intervene in Angelica’s case. “ARC is now in default on its obligations to Clear Cove and; according to Angelica; on its obligations to Angelica.”
In its motion, Clear Cove asks the court to allow it to join the case and to keep the frozen funds locked down until a judge decides who legally owns them. The company says releasing the money now could leave it unable to recover funds it claims were sold to it in a valid transaction.
“The Court should issue Clear Cove’s requested preliminary injunction because ARC and/or Angelica may, during the pendency of Clear Cove’s forthcoming breach of contract action against ARC, reach a settlement that results in the distribution of the Restrained Funds; which include the Transferred Interests and Secondary ERC Claim and represent substantially all of ARC’s liquid assets; to Angelica, leaving Clear Cove unable to recover from ARC,” the motion says.
Clear Cove also warns that ARC is financially unstable and could be pushed into bankruptcy, which it says would further complicate recovery if the funds are distributed prematurely.
Clear Cove says it is in the process of filing a separate lawsuit asserting its claim over the disputed tax receivables.
The judge has not yet ruled on Clear Cove’s request to intervene or its request for additional court orders. The case is part of a broader legal battle involving ARC’s finances, tax credits and alleged misuse of funds.
ARC was scheduled to appear in Manhattan federal court this morning for a hearing to determine whether the company and its owners should be held in contempt of court for violating a temporary restraining order by transferring money out of its bank account to its subsidiaries, after being ordered not to allow its account to dip below $10 million. ARC claims it could not comply with the order because it did not have $10 million in its account, and it had to pay necessary business expenses. Results of that hearing are not yet available.
The 23 page copy of Clear Cove Opportunities Fund I motion to intervene can be viewed in following downloadable link below:
arc-intervene-clear-coveDownload
