Abacus Global Management: A SPAC-Backed Mirage Crumbling Under Scrutiny?

The life settlements sector has long been a shadowy corner of finance, rife with opacity and regulatory missteps. Now, Abacus Global Management (NASDAQ: ABL) stands at the center of a storm as Morpheus Research's damning report reveals a web of accounting irregularities, governance failures, and systemic risks that could unravel its $740 million market cap. With shares plummeting 21.47% post-report and investors fleeing, the question is no longer if Abacus faces reckoning, but how far the fallout will spread.

The SPAC Backstory: A Recipe for Regulatory Blind Spots

Abacus' public debut in July 2023 via a SPAC merger with Terry Pegula's East Resources Acquisition Corp. set the stage for its current crisis. SPACs, notorious for lax due diligence and inflated valuations, allowed Abacus to bypass traditional IPO scrutiny. The merger brought Abacus a $618 million war chest, but it also entrenched problematic governance structures.

The SPAC's terms included Terry Pegula retaining 16.9% of shares and a board seat, while Abacus leaders altered valuation methods pre-merger to boost reported returns. This included adopting a “mark to model” approach, enabling non-cash gains to surge from 13% of revenue in 2022 to 61% by Q1 2025. Such reliance on paper gains—a hallmark of SPAC-linked firms like GWG Holdings—has now been exposed as a house of cards.

The Life Expectancy Scandal: Manipulating Mortality for Profit

At the heart of Morpheus' allegations is Abacus' dependence on Lapetus Solutions, an AI-driven life expectancy (LE) provider with ties to Abacus' leadership. Lapetus's co-founder co-authored a book with Abacus CEO Jay Jackson, and former Lapetus CFO Mary Beth Schulte now sits on Abacus' board. Despite this, Abacus omitted Lapetus from its 2024 annual report, claiming it was “not material.”

Industry experts beg to differ. Coventry Life Settlements' analysis of 4,378 Lapetus LEs found they underestimated life expectancy by an average of 31 months, resulting in an Actual-to-Expected (A/E) ratio of just 31%—a measure of accuracy. For context, a perfect score is 100%. This discrepancy suggests Abacus' $446 million life settlements portfolio could be overvalued by at least 35%, per independent estimates.

The consequences are stark: policies valued using Lapetus LEs are increasingly rejected by competitors, crippling Abacus' sales channels. Worse, Lapetus' flawed models mirror the practices of Mutual Benefits Corporation, a firm the SEC cited in 2008 for using fraudulent LEs to inflate valuations—a case that led to $1 billion in investor losses.

Governance Red Flags: A Pattern of Misconduct

Abacus' co-founders, Matthew Ganovsky and Kevin Kirby, have a history that should raise red flags for any investor. Their prior firms, including Advanced Settlements, faced regulatory bans and fines for fraud, including a 2003 Florida investigation for brokering stolen policies and a 2006 New York AG penalty for fiduciary breaches. Florida regulators even denied Abacus' license application in 2016, citing “fraudulent or dishonest practices” linked to destroyed records and kickbacks.

The SPAC merger exacerbated these risks. Abacus' acquisition of Carlisle Asset Management—a firm with its own history of overvalued funds—in July 2024 now looks like a desperate bid to offload toxic assets. Paid at 36x earnings, the deal allowed Abacus to book a 45% “gain” on policies sold to Carlisle, inflating Q1 2025 earnings by 81%. Yet Carlisle's flagship fund has lost 44% of its value since halting redemptions in 2020, and investors are now suing Abacus over misrepresentations.

Financial Weaknesses: Cash Flow Collapse and Debt Time Bombs

Behind the “profitable” headlines lies a dire reality. Abacus reported a negative $61.6 million operating cash flow in Q1 2025, with $356 million in debt—$117 million of which is due within nine months. Its EBITDA relies entirely on non-cash gains, which could vanish if regulators or auditors reject its valuation methods.

The Carlisle acquisition further compounds risks. The $145 million goodwill booked for the deal is now in jeopardy, as Carlisle's policies face skepticism over Lapetus LEs. Meanwhile, Abacus' $1 billion valuation—derived from inflated portfolios—appears increasingly illusory.

Investor and Regulatory Backlash: A Perfect Storm

The market's reaction to Morpheus' report speaks volumes: ABL's stock fell 21.47% in a single session, erasing over $150 million in shareholder value. Institutional investors are fleeing, and litigation looms. Wolf Popper LLP has already filed a securities class action accusing Abacus of misleading disclosures, while Carlisle's investors demand refunds for overvalued policies.

Adding to the chaos is Abacus' aggressive stock promotion ahead of a July 2024 lock-up expiration, when 50.7 million shares became sellable. Paid media campaigns by outlets like Proactive Investors—known for hyping penny stocks—hint at manipulation to buoy prices before insiders offload their holdings.

Auditors Grant Thornton, who blessed Abacus' books, further erode credibility. The firm's failure to detect fraud at GWG Holdings (another SPAC-linked life settlements firm) casts doubt on their diligence here.

Conclusion: Divest Now or Face the Fall

Abacus Global Management is a textbook case of SPAC-driven excess: inflated valuations, opaque accounting, and leadership with a track record of misconduct. The 21.47% stock plunge is just the start. With Lapetus's models under fire, Carlisle's liabilities mounting, and $356 million in debt coming due, the company faces a liquidity crisis that could force a restructuring or collapse.

Investment advice:
- Immediate divestment: Holders of ABL shares should exit now, as the risks of further write-downs and litigation outweigh any residual value.
- Short the stock: The disconnect between reported “profits” and actual cash flow creates a compelling short opportunity.
- Demand accountability: Investors should push for independent audits and pursue legal remedies against Abacus' leadership and SPAC sponsors for alleged fraud.

The life settlements sector's reputation for secrecy and sharp practices has never been clearer. Abacus' unraveling is not just a company-specific issue—it's a warning about the systemic flaws baked into SPAC-driven deals. For investors, the lesson is simple: trust, but verify—and in this case, verification has led to one conclusion: run.

Data as of June 2025. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.