Second Circuit scraps $609M asset freeze on 777 Partners guarantors

The Second Circuit unfroze 777 Partners guarantor assets tied to a $609 million debt. The lender had no claim.

Here is what happened.

In 2021, two Leadenhall entities agreed to lend capital to four special purpose entities connected to 777 Partners LLC. The borrowers used the money to buy investment instruments and, in return, gave Leadenhall a first-priority interest in all their assets as collateral. The borrowers' ultimate parents, 777 Partners and 600 Partners LLC, signed on as guarantors, unconditionally and irrevocably guaranteeing full payment and performance of the borrowers' obligations. But here is the catch: the guarantors never pledged any of their own assets.

Things started going sideways in September 2022 when Leadenhall got an anonymous tip. The collateral backing the loans was allegedly either pledged to other lenders as well or never actually owned by the borrowers in the first place. By late 2023, Leadenhall believed the tip checked out. In March 2024, they pulled the trigger and demanded immediate repayment of the full outstanding balance: $609,529,966.82.

Nobody could pay. Not the borrowers. Not the guarantors.

Leadenhall sued in the Southern District of New York, throwing breach of contract, fraud, and RICO claims at the borrowers, the guarantors, and Advantage Capital Holdings, a secured lender that had taken control of 777 Partners' operations. Ten days later, Leadenhall convinced the court to freeze assets across the board, borrowers and guarantors alike, to prevent everyone from draining what was left.

The guarantors and A-CAP pushed back. Their argument was straightforward: Leadenhall had a security interest in the borrowers' assets, not theirs. Freezing guarantor assets without any claim to them crossed a line the Supreme Court drew back in 1999 in a case called Grupo Mexicano.

The trial court disagreed and kept the freeze in place. The guarantors appealed.

The Second Circuit, in its March 23, 2026 decision, saw it differently. Writing for a three-judge panel, Circuit Judge Myrna Pérez held that Leadenhall had no lien on the guarantors' assets and no equitable interest in them either. There was no contract language pledging guarantor property. There was no specification of what additional collateral the guarantors were supposed to provide. Leadenhall was essentially asking the court to lock down assets it had no legal claim to, just to make sure money would be there when a judgment eventually came through. That is precisely what Grupo Mexicano says you cannot do.

The court also shot down Leadenhall's backup argument that the freeze could stand as a prejudgment attachment under New York state law. That kind of order requires its own set of factual findings, including whether the guarantors intended to dodge a future judgment. The trial court never made those findings, and the appeals court was not about to make them for the first time.

The panel vacated the asset freeze on the guarantors and sent the case back to the lower court for further proceedings. The freeze on borrower assets, which nobody challenged on appeal, stays in place.

For anyone in the lending or fund management space, this case is a reminder that guarantee agreements have limits. A guarantor's promise to pay is not the same as a guarantor pledging assets. If you want the right to reach guarantor property before a judgment, you need that nailed down in the contract from the start. A broad guarantee clause, no matter how sweeping the language, will not get you there after the fact.

The underlying litigation continues. Whether Leadenhall pursues a formal attachment on remand or takes a different path remains to be seen. But the Second Circuit has drawn a clear line: you cannot freeze what you do not have a claim to, no matter how much money is at stake.