Fat Brands stock craters after company, chair Andy Wiederhorn charged in $47 million 'sham' loan scheme

Federal authorities on Friday charged Fat Brands and its chair Andy Wiederhorn of committing a brazen scheme that netted him $47 million in bogus loans from the restaurant company that owns Fatburger, Johnny Rockets and Twin Peaks.

Shares of Fat Brands closed down 27% on Friday. The company has a market value of $92 million.

Fat Brands, Wiederhorn and a few other people were criminally indicted by a federal grand jury in Los Angeles for wire fraud, tax evasion and other counts related to the alleged scheme.

In a separate civil complaint, the U.S. Securities and Exchange Commission accused the company and Wiederhorn of violations related to the same conduct.

"These charges are unprecedented, unwarranted, unsubstantiated and unjust," Fat Brands counsel Brian Hennigan said in a statement. "They are based on conduct that ended over three years ago and ignore the Company's cooperation with the investigation."

Wiederhorn, who was convicted two decades ago in a criminal case that involved similar conduct, was separately criminally charged in an indictment in Los Angeles of being a federal felon in possession of a handgun and ammunition.

"We look forward to making clear in court that this is an unfortunate example of government overreach — and a case with no victims, no losses and no crimes," Wiederhorn's attorney Nicola Hanna said.

As chief executive of Fat Brands, Wiederhorn, 58, allegedly directed the company to loan its own funds to him, with no intention of ever paying the "sham" loans back, according to the indictment.

The SEC alleges that Wiederhorn then used the cash to pay for private jets, first-class airfare, luxury vacations, mortgage and rent payments, plus nearly $700,000 in "shopping and jewelry."

Wiederhorn stepped down