MANHATTAN — A federal judge has now tightened the freeze on the bulk of Addiction Recovery Care’s cash, following a contempt hearing Thursday in New York.

The dispute centers on Angelica Capital Trust’s advance of $5.4 million to ARC back in November, with the agreement that ARC would turn over an $8.1 million in tax refunds from Employee Retention Credits as repayment. However, Angelica says ARC kept and spent the money instead, defaulting on the loan.

ARC has not disputed that it owes the money.

Angelica 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 Jan. 13, U.S. District Judge George B. 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 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 Jan. 19.

On Jan. 22, Judge Daniels granted a preliminary injunction segregating $4.7 million, representing the bulk of ARC’s stated cash balance, into a frozen account. He allowed the company to keep $1 million to cover daily expenses that was expected to last until the expected sale of the company Feb. 4.

But on Jan. 25, Angelica attorney Anthony Candido wrote a letter to Judge Daniels alleging another violation of the judge’s orders.

“Respondents [ARC] transferred or spent $2.1 million from their accounts withing two days after the hearing (and may have transferred more since),” 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 Jan. 19, when the company provided a snapshot of its account balance to the court, and Jan. 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 as California-based Emend Healthcare in 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 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. He also ordered ARC to provide Angelica’s attorneys with the account balance each business day, “to ensure the funds have not been dissipated.”

Judge 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.”

The judge 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.

Previous coverage of this story and relevant court documents can be found at the following links:

• Creditor seeks to freeze Addiction Recovery Care’s finances, Jan. 22, 2026
• Judge orders freeze of nearly all ARC assets, Jan. 23, 2026
• Attorneys ask to withdraw, as ARC faces contempt hearing Thursday, Jan. 27, 2026
• Court filing claims ARC sold disputed tax receivables twice, Jan. 29, 2026

Attached below are Candido’s letter, an email attachment accompanying his letter, ARC’s opposition to a contempt finding, and Judge Daniels’ order for ARC and Truist not to cause any money to be transferred from the segregated account.