American Apparel has ended its downward financial spiral for the time being by filing for Chapter 11 bankruptcy protection only two months after warning that it lacked the money to stay afloat. The filing is a major setback to its controversial CEO Dov Charney, who had been accused of sexual harassment by former employees and the company. Charney denies the charges. Charney owned about 42% of the company, but signed over the bulk of his stake to hedge fund Standard General, which he believed he had teamed up with to take over the company. Standard General now holds his stake as collateral, according to Reuters. Charney launched series of lawsuits against the company and its investors, including a $30 million lawsuit against Standard General, one of the company’s biggest shareholders, for defamation. He suggested there was a conspiracy at work as the hedge fund fooled him into giving up his seat on the company’s board and control of most of his stock.
