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Redbox's network of 24,000 DVD rental kiosks and streaming services will be closing for good after its parent company, Chicken Soup for the Soul Entertainment, decided to change its Chapter 11 bankruptcy file to Chapter 7 liquidation on Wednesday, July 10.

Prior to its 2020 acquisition by Chicken Soup for the Soul Entertainment, Redbox's fortunes had been deteriorating for almost a decade. The company's highest year of sales was 2013, when it brought in $1.97 billion. It had over 43,000 kiosks throughout the United States and Canada, packed with movies, TV series, and games at the time.

Redbox's Parent Firm Facing Liquidation

With $970 million in total obligations and $414 million in consolidated assets as of March 31, Chicken Soup for the Soul Entertainment filed for Chapter 11 reorganization on June 28. However, on Wednesday, the company decided to liquidate its assets. This means that all of its workers are out of work and will not be receiving any kind of compensation or benefits. The business had 1,033 workers as of the end of June.

The Chapter 7 liquidation was approved on Wednesday by Judge Thomas M. Horan of the US Bankruptcy Court for the District of Delaware, as Variety reported.

According to the Wall Street Journal, Horan stated that the company is unable to continue paying its workers or any expenses. The court ruled that 1,000 workers would soon be out of work and would not get compensation for their services.

Horan added that the possibility of misappropriation from employee trust money would be investigated by an appointed bankruptcy trustee.

Misappropriated Employees' Trust Fund?

Before filing for Chapter 11, the entertainment firm reportedly had not paid its staff or its suppliers for at least four weeks. The firm was accused of severe mismanagement in court filings by HPS, the company's primary lender.

In a declaration supporting the bankruptcy petition, Chicken Soup for the Soul Entertainment Chairman and CEO Bill Rouhana Jr. claimed that lenders' failures to meet their obligations led to defaults and contractual terminations across critical content and service providers. On June 11, Rouhana unilaterally disbanded the board, and he resigned as CEO on June 24.