A federal bankruptcy judge in Texas has approved the sale of 30 properties held by Inspired Healthcare Capital, the Scottsdale, Ariz.-based assisted-living developer that filed for Chapter 11 protection in February. The sale price totals $713 million, according to court documents and published reports, representing roughly 59% of the $1.2 billion that financial advisors raised from clients through private placements and Delaware Statutory Trusts (DSTs).
The properties constitute the bulk of Inspired Healthcare's real estate portfolio, said attorneys involved in the case. The approval came from U.S. Bankruptcy Judge Mark X. Mullin, who has overseen the proceedings since the company's collapse. The sale is a key step in unwinding the company's assets, but the proceeds will not flow directly to investors, as the bankruptcy estate must first cover administrative costs, secured claims, and other obligations.
August Iorio, a plaintiff's attorney representing investors who have filed suit against the broker-dealers that sold the Inspired Healthcare products, cautioned that the headline sale price is misleading. "The sale price is the headline number, but based on what we know today, I think it is very likely that many, if not most, DST investors will lose at least some of their principal investment," he said. "The sale prices may sound encouraging, but they don't tell us how much money will actually make its way back to investors. And there are still disputes over how the proceeds will be divided."
The bankruptcy has been complicated by the fact that broker-dealers and financial advisors who sold the securities earned more than $100 million in fees and commissions. Those fees are now a point of contention, as investors argue that the sales were unsuitable given the high-risk nature of the assets. The Securities and Exchange Commission initiated a formal investigation into Inspired Healthcare in April 2025, according to a court filing, which prompted the company to halt distributions to investors and lenders.
One of the most contentious issues has been an injunction granted by Judge Mullin over the summer that temporarily halted FINRA arbitration claims against broker-dealers. The injunction, issued in response to a motion by Inspired Healthcare Capital Holdings, stunned investor attorneys and created uncertainty for hundreds of pending cases. However, recent clarifications have allowed some claims to proceed.
According to Iorio, investors with FINRA arbitration claims against broker-dealers that sold Inspired Healthcare products may now move forward, provided that the claims specifically related to Inspired Healthcare are set aside. The arbitration panels can then hear other claims involving sales practices and other products. "FINRA has also indicated that objections and related procedural disputes will be resolved by the arbitration panels," Iorio said. "In practical terms, FINRA is leaving it to the parties and ultimately the arbitrators in each case to address the continuation of non-Inspired Healthcare claims, rather than automatically keeping every claim in a mixed-investment arbitration on hold."
The sale of the 30 properties is a significant milestone, but the distribution of proceeds will be a lengthy process. The bankruptcy estate must resolve claims from secured lenders, unsecured creditors, and investors, who are likely to receive only a fraction of their original investments. The case has also drawn scrutiny from regulators, and the SEC's investigation remains ongoing.
For financial advisors, the Inspired Healthcare collapse serves as a cautionary tale about the risks of alternative investments, particularly DSTs, which are often marketed as a way to defer capital gains taxes but carry substantial illiquidity and concentration risk. The case has also highlighted the potential liability for broker-dealers that sell such products without adequate due diligence.
As the bankruptcy proceedings continue, investors and advisors alike will be watching how the remaining assets are liquidated and how the courts allocate the proceeds. The outcome could set a precedent for how similar cases are handled in the future, particularly regarding the interplay between bankruptcy law and FINRA arbitration. For now, the $713 million sale provides a partial recovery, but the road to full restitution remains uncertain.
