Court Halts Papaya's Funds Transfer Amid $730M Legal Battle with Skillz
A U.S. bankruptcy court has blocked Papaya Gaming from transferring funds out of its U.S. accounts while Skillz pursues collection of a $730 million judgment stemming from a false advertising ruling. The court found that Papaya moved over $70 million to Israeli accounts before a key trial without court approval and deemed the CEO's testimony unreliable. The order restricts Papaya’s payments to only pre-approved routines, requires reporting to Skillz’s legal team, and remains in effect until the U.S. court evaluates any repayment plan approved in Israel.
A U.S. bankruptcy court in Delaware, led by Judge Mary F. Walrath, issued a restraining order on October 27 halting Papaya Gaming from transferring funds out of its U.S. bank accounts. This comes amid Skillz’s effort to collect a $730 million judgment following a false advertising ruling, significantly higher than the $420 million initially awarded by a jury in April 2026. The court found that Papaya moved over $70 million from a U.S. account to Israeli accounts before a key trial without seeking court approval, raising concerns about asset stripping. CEO Oriel Bachar was deemed “not credible” in testimony regarding these transfers, and the court questioned his role as foreign representative. Under the order, Papaya may only make pre-approved routine payments, funded at 115% from non-U.S. accounts, and must report all transactions to Skillz’s legal team and the U.S. Trustee. The company’s U.S. operations have historically generated 85%–97% of its monthly revenue, with approximately $30 million leaving U.S. accounts monthly in the year prior to the ruling.
The legal conflict stems from a 2021 dispute over advertising practices, culminating in a July 2026 judgment against Papaya. In response, Papaya sought recognition of its Israeli insolvency proceedings in the U.S., but Judge Walrath granted only “non-main” status to its U.S. subsidiary, affirming that its center of main interests remains in the United States. Meanwhile, a Tel Aviv court rejected an initial repayment plan
The case could set a precedent for how cross-border insolvency and asset protection are handled in the gaming industry, particularly when companies attempt to shield funds from U.S. judgments by shifting operations abroad. Skillz’s pursuit of the $730 million judgment highlights growing scrutiny over deceptive advertising in digital games, potentially influencing regulatory standards across app marketplaces. If upheld, this ruling may deter other game developers from moving assets out of jurisdictions with active litigation, reinforcing the authority of U.S. courts in international financial disputes. A comparable earlier case is the 2018 FTC action against Zynga over deceptive in-game mechanics, which led to broader transparency requirements. What remains uncertain is whether the Israeli court’s upcoming vote will yield a viable repayment plan that satisfies U.S. creditors. The outcome may shape how multinational gaming firms structure their financial operations and respond to legal c