This article originally appeared in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.
Over the summer Term Sheet reported on the unraveling of early stage venture firm Expansive Ventures. Co-founders Adeo Ressi and Jon Soberg had a major falling out involving accusations of office lock-outs, “ambushes” and threats. (Read the details of that here.) Soberg sued Ressi, and in arbitration, a judge ruled in favor of Soberg, requiring Ressi to pay him $3.5 million — $2.5 million in compensation to make up for lost management fees and an additional $1 million in damages to his reputation.
Ressi appealed. Since then, Santa Clara county mortgage record indicates that Elon Musk, Ressi’s college roommate, loaned him $500,000 and took a lien against Ressi’s home in Palo Alto.
On August 1, Ressi filed a Form UCC1 financing statement, which gives a creditor – in this case, Musk — the right to take possession of assets for repayment. The collateral listed includes Ressi’s real estate, the furniture and fixtures at his Palo Alto Home, his Tesla, his advisory shares and options of three companies (called Mousera, Md Collab, and Sugegstuc), receivables from his accelerator program (The Founder Institute) and web project (TheFunded), and all cash and bank accounts.
When asked about Musk’s involvement, Ressi said “Elon is a long-time friend and supporter, who epitomizes going all-in on business.”
On September 30, Judge Harold E. Kahn in the Superior Court of California confirmed the arbitration award and denied Ressi’s motion to vacate or correct the decision, according to public court documents. In other words, Ressi must pay his former partner the $3.5 million.
On Nov. 11, Ressi filed an appeal to the confirmation. He was scheduled to appear in court on Wednesday for a debtor’s exam, but on Tuesday, he filed for Chapter 11 bankruptcy. (Typically Chapter 11 is for companies, but he has filed as an individual.) In the filing, he lists his assets as between $10 million and $50 million and liabilities between $1 million and $10 million. Musk is listed among his creditors.
The bankruptcy filing puts the pending lawsuit on hold. Expansive Ventures’ fund and its investments remain in limbo.
Ressi provided the following statement:
Soberg provided the following comment: