Publishers Clearing House: Sweepstakes Icon Collapse Leaves Prize Winners Unsecured

For 72 years, Publishers Clearing House ran sweepstakes promotions that included the "$5,000 a week, forever" prize. When the company filed for chapter 11 bankruptcy on April 9, 2025, it ended a long-running direct marketing business.

Founded in 1953 by Harold Mertz in his Long Island basement, PCH distributed over $614 million in prizes through its sweepstakes model. The company's annual revenue fell from $854 million in 2017 to $182 million by 2023—a 78% decline. PCH entered bankruptcy with approximately $490,000 in cash and more than $65 million in liabilities, seeking to shed its legacy magazine subscription and mail-order businesses and pivot to digital advertising.

The bankruptcy affected the "forever" prize winners—at least 10 people who had been promised $5,000 a week for life, some owed more than $2 million each, now unsecured creditors with claims in the case. ARB Interactive, the sweepstakes casino operator that won a 20-round auction with a $7.1 million bid, declined to assume pre-acquisition prize obligations. When Judge Martin Glenn confirmed the liquidating plan on December 22, 2025, he handed control of the wind-down to an attorney representing unsecured creditors, who will likely receive pennies on the dollar.

Debtor(s)	Publishers Clearing House LLC
Post-Sale Name	382 Channel Drive LLC
Headquarters	Port Washington, New York
Industry	Direct Marketing / Sweepstakes
Founded	1953
Employees	~400
Petition Date	April 9, 2025
Court	U.S. Bankruptcy Court, Southern District of New York
Case Number	25-10694
Judge	Hon. Martin Glenn
Assets at Filing	$1M–$12M
Liabilities at Filing	$65M–$100M
Cash at Filing	~$490,000
DIP Facility	$5.5M factoring facility (Prestige Capital Finance, LLC)
Stalking Horse	None
Winning Bidder	ARB Interactive, Inc.
Purchase Price	$7.1 million cash + ~$378K assumed liabilities
Auction Date	June 17, 2025
Sale Order	June 30, 2025
Plan Type	Liquidating Plan
Confirmation Date	December 22, 2025
Plan Administrator	Kenneth P. Silverman

Company Background and Prize Patrol History

From Basement to Direct Mail Growth (1953–1988)

Harold Mertz was a former door-to-door magazine subscription sales manager when he founded Publishers Clearing House in 1953. Working from his basement in Port Washington, Long Island, with help from his first wife LuEsther and daughter Joyce, Mertz mailed 10,000 envelopes offering 20 magazine subscriptions. The modest operation grew quickly—within a few years, PCH moved out of Mertz's basement and into commercial office space, eventually becoming the largest multi-magazine subscription agency in the industry.

The company launched its first sweepstakes in 1967, modeled after contests held by Reader's Digest. By 1979, PCH had distributed $7 million in prizes. Revenue reached $50 million by 1981 and $100 million by 1988, the same year the company increased its grand prize to $10 million.

The Prize Patrol Era (1989–2000)

In 1989, Dave Sayer and Todd Sloane created the Prize Patrol, inspired by the 1950s television series "The Millionaire." The Prize Patrol became part of PCH's sweepstakes marketing.

Prize distributions grew from $40 million by 1991 to $137 million by 2000. The company used sweepstakes mailings with "You may already have won!" headlines and entry forms designed to increase engagement.

A History of Regulatory Settlements

The first major settlement came in 1999—a $30 million class action resolution addressing complaints about mailings that declared "You are a winner!" and featured mock personalized checks that misled recipients into believing they had already won prizes. In 2000, PCH reached an additional $18 million settlement with 24 states over similar allegations. A third settlement in 2001 with 25 states added another $34 million, bringing total settlements to $82 million in three years.

The regulatory pressure continued into the modern era. In June 2023, the Federal Trade Commission charged PCH with using "dark patterns" to mislead consumers about sweepstakes entries. The FTC alleged that PCH made consumers believe that purchasing merchandise was necessary to win or would increase their chances of winning—despite the company's "no purchase necessary" disclaimers. The complaint further alleged that PCH charged hidden fees averaging more than 40% of product costs and had shared consumer data with third-party marketers despite privacy policy representations to the contrary. The FTC specifically alleged that the company targeted older and lower-income consumers.

PCH agreed to a $18.5 million settlement and was required to eliminate deceptive language around sweepstakes and sales, halt surprise fees, and delete all consumer data collected prior to January 2019. The FTC mailed refund checks to 281,724 affected consumers on April 30, 2025, three weeks after PCH filed for bankruptcy protection.

Revenue Decline and the End of Annuity Protection

The cumulative impact of over $100 million in regulatory settlements since 1999 coincided with the decline of PCH's core business. As consumers shifted to digital media and e-commerce, demand for magazine subscriptions and mail-order merchandise declined. PCH's annual revenue fell from $854 million in 2017 to $182 million in 2023—a 78% decline in six years.

According to a retired PCH executive, the company had historically safeguarded "forever" prizes through prepaid annuities—insurance products that guaranteed prize payments regardless of the company's financial condition. PCH stopped the annuity practice after 2003, leaving subsequent prize obligations without that protection.

In 2019, one winner chose the lump sum option and received $3 million.

Path to Bankruptcy

Industry Headwinds

Publishers Clearing House's decline reflected broader transformations in the direct mail advertising industry. According to IBISWorld data, industry revenue has declined at a compound annual growth rate of 0.3% over the past five years, reaching an estimated $11.3 billion in 2025. The number of businesses in the direct mail advertising sector declined at a CAGR of 4.6% between 2020 and 2025—from approximately 1,670 companies to 1,460. The advent of digital marketing has progressively siphoned demand from traditional direct mail advertisers, and the COVID-19 pandemic accelerated consumer adoption of e-commerce channels that bypassed mail-order catalogs.

PCH's business model—built on magazine subscriptions, merchandise catalogs, and physical sweepstakes mailings—faced pressure from multiple directions. Magazine circulation had been declining for decades. E-commerce giants like Amazon reduced demand for mail-order catalogs. Digital advertising offered more targeted, measurable, and cost-effective marketing than bulk mailings.

The Digital Pivot

The bankruptcy filing was positioned as a move to finalize the shift away from legacy businesses—direct mail, retail merchandise, and magazine subscriptions—and transition to a "pure digital advertising" model.

PCH entered chapter 11 with approximately $40 million in debts to employees, vendors, service providers, and landlords. The company cited shifts in consumer behavior, rising operational costs, and competition from e-commerce giants.

Pre-Filing Financial Condition

By April 2025, Publishers Clearing House entered bankruptcy with approximately $490,000 in cash. Total liabilities exceeded $65 million and potentially reached $100 million, while assets totaled less than $12 million. The company reported approximately 400 employees.

Most consequentially for the company's public profile, at least 10 unpaid "forever" prize winners remained on the company's books—individuals who had been promised $5,000 per week for life and who expected those payments to continue indefinitely. Most were owed more than $2 million each. Their claims joined the general unsecured creditor pool, competing with trade vendors and other unsecured claimants for whatever remained after secured and priority claims were satisfied.

Notably, over 40% of PCH's profits had historically gone to trusts benefiting charities.

The 363 Sale Process

Factoring-Based DIP Financing

Publishers Clearing House's DIP financing used a receivables purchase (factoring) facility from Prestige Capital Finance, LLC rather than a traditional term loan. Under the arrangement, Prestige would purchase PCH's accounts receivable at a discount, providing working capital while the company marketed its assets for sale.

DIP Facility Terms

The DIP facility provided liquidity while the company marketed its assets for sale.

Sale Timeline and Auction

With DIP financing in place, PCH moved quickly to market its assets. The debtors retained SSG Advisors as investment banker and launched a sale process designed to generate maximum value through competitive bidding.

Sale Process Milestones

The auction proved competitive. ARB Interactive, the company behind sweepstakes casino Modo Casino, emerged as the winning bidder following approximately 20 rounds of bidding. The final purchase price was $7.1 million in cash plus assumption of approximately $378,000 in outstanding expenses.

ARB Interactive: The Buyer

ARB Interactive is a Miami-based company that operates in the sweepstakes casino space. ARB operates Modo Casino at Modo.us and is a member of the Social Gaming Leadership Alliance (SGLA), a trade group organized by fellow sweepstakes casino operator VGW.

The sweepstakes casino industry faces regulatory limits. Four states—New York, Connecticut, Nevada, and Montana—have passed legislation banning sweepstakes gaming companies from operating within their borders. ARB itself is facing lawsuits in California, Illinois, and Tennessee related to its gaming operations.

ARB's CEO Patrick Fechtmeyer said the acquisition would "blend PCH's storied heritage with cutting-edge, free-to-play mobile gaming experiences."

ARB assumed only post-petition prize liabilities. The sale agreement provided that ARB would honor prize obligations for contests awarded after July 15, 2025—the closing date—but bore no responsibility for pre-acquisition prize obligations. Pre-acquisition prize winners remained unsecured creditors of the bankruptcy estate.

Following the sale, PCH was renamed 382 Channel Drive LLC, derived from the company's former Port Washington street address.

The "Forever" Prize Winners

The Scope of Unpaid Obligations

The "forever" prize winners included individuals who had won "$5,000 a Week for Life" or similar perpetual payment prizes. Bankruptcy records disclosed at least 10 unpaid "forever" prize winners, most owed more than $2 million each. Their payments, which had continued for years, stopped after the April 2025 bankruptcy filing.

Under bankruptcy law, the prize winners became general unsecured creditors—grouped with trade vendors, service providers, and other unsecured claimants in the lowest-priority class. University of Oregon law professor Andrea Coles-Bjerre said prize winners "join the list of unsecured creditors" and face the same pro rata distribution as everyone else. The professor said it was unlikely past winners would recover their prize money.

Human Stories

The unsecured status translated into concrete hardship for some affected winners.

John Wyllie, a 61-year-old Bellingham, Washington resident, had been promised $5,000 per week for life. Wyllie hadn't worked for more than 10 years. When payments stopped, he sold possessions—including a jet ski and trailer—to pay bills.

Tamar and Matthew Veatch, disabled Army veterans living in Oregon, had relied on nearly $200,000 per year in PCH prize money since 2021. The missed July payment left them unable to cover back taxes and basic household expenses.

PCH's "forever" payments were unsecured corporate obligations rather than annuity-backed payments.

Winners Who Escaped

Not all prize winners suffered equally. In 2019, one winner chose the lump sum option rather than ongoing payments and received $3 million. Winners whose prizes were awarded before 2003 had prizes safeguarded through prepaid annuities, according to a retired PCH executive.

Corporate promises of perpetual payments are unsecured unless backed by annuities.

Liquidating Plan

Plan Structure

With the 363 sale complete and substantially all assets transferred to ARB Interactive, the debtor—now named 382 Channel Drive LLC—moved forward with a liquidating plan.

Plan Timeline

Judge Martin Glenn confirmed the Amended Plan of Liquidation on December 22, 2025, appointing Kenneth P. Silverman as Plan Administrator to oversee the wind-down process.

Classification and Treatment

Distribution mechanics. The plan established a Post-Confirmation Estate Fund consisting of all cash and liquidated assets as of the Effective Date. Distributions follow standard bankruptcy priority: administrative expenses first, then Priority Tax Claims, then professional fees, and finally Classes 1 through 3 in order. Class 3 general unsecured creditors—including the "forever" prize winners—receive pro rata distributions from whatever remains after senior claims are satisfied. Class 4 equity interests are canceled without any distribution.

Bloomberg Law reported that prize winners will likely receive "pennies on the dollar" for claims that totaled millions.

Consumer Ombudsman

The case included the appointment of a Consumer Ombudsman to represent the interests of PCH customers and sweepstakes participants. On June 16, 2025, Judge Glenn appointed Lucy L. Thomson to serve in this role.

The ombudsman's mandate included monitoring the treatment of consumer claims, representing consumer interests in key proceedings, and ensuring that the sale and plan processes considered consumer concerns.

Multiple letters from consumers were filed with Judge Glenn claiming that the writers had won PCH sweepstakes prizes.

Thomson submitted her final fee application on September 24, 2025, concluding her oversight as the case moved toward plan confirmation.

Case Professionals

Debtors' Retained Professionals

Other Case Professionals

Professional fee statements were filed monthly throughout the case, with final fee applications submitted by SSG Advisors and the Consumer Ombudsman in September 2025.

Contested Matters and Lease Rejections

Duality Holdings Dispute

The docket reflected disputes with Duality Holdings LLC regarding relief from the automatic stay. Multiple stipulation orders resolved these issues, culminating in Duality's withdrawal of its claim on November 12, 2025. The nature of the underlying dispute—whether related to intellectual property, commercial agreements, or other matters—was not fully specified in public filings.

Pett Claimants Litigation

Several pro hac vice admissions for attorneys representing "Pett Claimants" were filed. A stipulation and order lifting the automatic stay for these claimants was entered on September 8, 2025, allowing the outside litigation to proceed. The identity of the Pett Claimants and the nature of their claims were not detailed in the public docket.

Lease Rejections

Publishers Clearing House's physical operations required substantial real estate and service contracts that became unnecessary following the asset sale. Six omnibus lease and executory contract rejection motions were filed between April and September 2025:

The company filed six omnibus lease and executory contract rejection motions between April and September 2025.

Key Timeline

Frequently Asked Questions

Why did Publishers Clearing House file for bankruptcy?

Publishers Clearing House's annual revenue fell from $854 million in 2017 to $182 million by 2023—a 78% decline driven by the decline of direct mail marketing and magazine subscriptions. The company entered bankruptcy with approximately $490,000 in cash and more than $65 million in liabilities, seeking to shed its legacy mail-order businesses and pivot to digital advertising.

What happened to the "forever" prize winners?

At least 10 winners who had been promised "$5,000 a week for life" became unsecured creditors when PCH filed for bankruptcy. Most were owed more than $2 million each. ARB Interactive, the buyer, explicitly declined to assume pre-acquisition prize obligations. Prize winners will likely receive "pennies on the dollar" from the liquidating plan distributions.

Who bought Publishers Clearing House?

ARB Interactive, the Miami-based company behind sweepstakes casino Modo Casino, won a 20-round auction with a $7.1 million cash bid plus assumption of approximately $378,000 in outstanding expenses.

Will ARB honor existing prize obligations?

No. The sale agreement provided that ARB assumed only prize obligations for contests awarded after July 15, 2025—the closing date. All pre-acquisition prize winners were left as unsecured creditors of the bankruptcy estate.

What was PCH's history of regulatory settlements?

PCH paid over $82 million in regulatory settlements since 1999. Major settlements included $30 million (1999 class action), $18 million (2000, 24 states), $34 million (2001, 25 states), and $18.5 million (2023 FTC settlement). The FTC alleged that PCH used "dark patterns" to mislead consumers, charged hidden fees averaging 40%+ of product costs, and targeted older and lower-income consumers.

What was PCH's DIP financing?

PCH used a $5.5 million receivables factoring facility from Prestige Capital Finance rather than traditional term loan DIP financing.

What is a Consumer Ombudsman and why was one appointed?

The court appointed Lucy L. Thomson as Consumer Ombudsman to represent the interests of PCH sweepstakes participants and consumers. The appointment addressed consumer claims in the case, including correspondence claiming prize winnings.

Why did PCH stop prepaying prize annuities?

PCH historically safeguarded "forever" prizes through prepaid annuities that guaranteed payments regardless of company solvency. The company stopped this practice after 2003, leaving subsequent prize obligations unfunded and contingent on corporate ability to pay.

What happened to PCH's charitable giving?

Over 40% of PCH's profits historically went to trusts benefiting charities.

What is the current status of the case?

The liquidating plan was confirmed on December 22, 2025, with Kenneth P. Silverman appointed as Plan Administrator. The case remains in plan administration as remaining assets are liquidated and distributed to creditors according to the confirmed plan's priority scheme.

Who is the claims agent for Publishers Clearing House?

Omni Agent Solutions, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

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