Delaware Judge Freezes Papaya Gaming Asset Transfers After Finding CEO Testimony Not Credible

U.S. Bankruptcy Judge Mary F. Walrath issued a sweeping asset freeze against Papaya Gaming Inc. on October 27, 2026, following a three-day evidentiary hearing that exposed the mobile gaming operator's aggressive strategy to move U.S. profits offshore while facing a massive judgment. The order represents a critical intervention in what has become a textbook example of cross-border fraud enforcement challenges in the gaming industry.

Papaya Gaming, headquartered in Tel Aviv, operates primarily through its U.S. subsidiary, which generates approximately 90 percent of the parent company's revenue. An April 2026 federal jury verdict found that Papaya had defrauded Skillz Platform Inc., a subsidiary of Firy Inc., by falsely advertising faster matchmaking in real-money games including Solitaire Cash, Bingo Cash, and Bubble Cash. The company systematically paired paying players against automated computer bots rather than live human opponents, a deceptive practice that generated unjust profits ultimately valued at $719 million by U.S. District Judge Denise Cote.

Instead of preparing to satisfy the judgment, Papaya accelerated its capital flight strategy. The evidentiary hearing revealed that the company had been systematically transferring approximately $30 million per month from its U.S. accounts to Israeli holdings. Additionally, Papaya paid its shareholders tens of millions of dollars while the federal lawsuit remained active in U.S. District Court for the Southern District of New York. Judge Walrath characterized this conduct as extraordinary and noted that Papaya failed to inform the U.S. District Court about these financial transfers, omissions that likely would have altered the court's decision on restraining domestic assets.

The judge's findings regarding CEO Oriel Bachar's credibility carry particular weight. Walrath explicitly stated that Bachar's testimony was not credible, a determination that undermined Papaya's primary defense strategy and justified the stringent new restrictions. Under the freeze order, all ordinary-course transactions must now be reported to the designated U.S. trustee on a confidential basis and pre-funded at 115 percent of the transaction amount. Payments to affiliates and company insiders remain prohibited entirely.

Papaya's initial response to the judgment exemplified the company's continued resistance to accountability. The operator proposed using future operating profits to pay the $719 million judgment over 6.5 years, claiming the company remains profitable despite eliminating bots but asserting that multi-year financing was necessary for survival. An Israeli court rejected this proposal, forcing Papaya to develop a revised payoff plan before the Tel Aviv District Court's temporary stay of proceedings expires on November 25, 2026.

The case underscores systemic vulnerabilities in enforcement mechanisms targeting international gaming operators. Chapter 15 cross-border bankruptcy protection, which Papaya invoked, creates jurisdictional complications that bad-faith actors can exploit. Judge Walrath's recognition of the Israeli proceeding as the main proceeding, despite Skillz's objections, reflects the deference U.S. courts must afford foreign restructurings under UNCITRAL Model Law frameworks. Yet the asset freeze demonstrates that judicial scrutiny can still impose meaningful constraints on operator misconduct, even when international structures complicate enforcement. For the broader gaming compliance ecosystem, the Papaya case reinforces that auditable transaction controls and credibility determinations remain effective countermeasures against fraudulent asset concealment.