California-based trucking company Kal Freight Inc. is facing accusations of fraud so extensive it's reshaping conversations around financial misconduct in the freight industry.
With $325 million in long-term debt and $24 million in unsecured claims, the company's recent Chapter 11 bankruptcy filing is only the beginning of a scandal involving phantom assets, forged titles and misappropriated collateral.
Kal Freight's largest creditor, Daimler Truck Financial Services, alleges the company secured $16.8 million in loans to purchase 164 trailers from Vanguard -- trailers that recently were discovered to have never existed. Kal Freight supplied Daimler with fraudulent titles for these nonexistent assets and even made monthly payments to perpetuate the illusion.
The deceit didn't stop at ghost assets. Daimler claims Kal Freight illegally transferred 366 trailers, which later were used as loan collateral, to its Canadian affiliate, Big Rig Trailers & Leasing.
These trailers were then sold or leased to third parties, potentially leaving Daimler with a $20 million shortfall and embroiling innocent third parties in legal disputes over ownership.
Kal Freight is also accused of transferring trucks and trailers, while still under Daimler's lien, to another affiliate, Kal Trailers & Leasing, which then sold the assets to unsuspecting buyers.
Daimler received no proceeds from these transactions, further jeopardizing its recovery efforts.
Founded in 2014 with just six trucks, Kal Freight's meteoric rise included rapid expansion into parts and tire businesses during the COVID-19 boom. But these ventures, launched in 2020 and 2021, proved unprofitable and drained the company's finances. By the time market rates dropped, Kal Freight was already drowning in debt.
In response to mounting legal and financial pressure, Kal Freight has removed its president, Kalvinder Singh, as a director and appointed independent directors and a chief restructuring officer to oversee its operations.
As part of the Chapter 11 proceedings, the company is liquidating non-core assets, including parts and tire businesses, to focus on its core trucking operations.
Read more about what this bankruptcy means for the industry here.
A sophisticated freight scam has left Flycatcher, a London-based toy company, reeling after three shipments of its popular Smart Sketcher toys -- valued at over $1 million -- were stolen.
The heist happened in October when scammers posing as legitimate trucking companies secured contracts through double-brokering schemes. Instead of delivering 12,600 toys to a Walmart distribution center in Atlanta, two trucks were diverted to Los Angeles, while the fate of the third shipment remains unknown.