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After a major applesauce recall in late 2023, applesauce producer WanaBanna filed for Chapter 7 bankruptcy on May 15, 2024.

Understanding Chapter 7 Bankruptcy

Chapter 7 bankruptcy is distinct from Chapter 11; Chapter 7 is often referred to as “liquidation” bankruptcy because there is no plan to restructure the company or any plans for repayment. Instead, the company will sell off its assets to pay its debts.

Applesauce maker files Chapter 7 bankruptcy : Financial Troubles and Legal Issues

According to court documents, WanaBanna owes $26 million to 1-49 creditors while holding an estimated $500,000 to $1 million in assets. The applesauce maker is also facing multiple cases and an investigation by the New York Environmental Protection Bureau, with all cases currently pending in court.

Applesauce maker files Chapter 7 bankruptcy : The Recall and Its Impact

The bankruptcy filing follows a major recall in November 2023 of three WanaBanna products containing cinnamon contaminated with lead. Officials reported that cinnamon tested from the plant had lead levels more than 2,000 times higher than the maximum level proposed by the FDA. The recalled pouches have been linked to dozens of illnesses in U.S. children, with the FDA reporting 90 confirmed cases, though the full investigation is still ongoing.

Possible Causes of Contamination

One theory suggests the cinnamon may have been contaminated for economic reasons. This could involve adding or subtracting ingredients to boost the spice’s value. For example, compounds like red brick, red lead salt, lead oxide, and lead chromate, which resemble cinnamon’s red color, have been added to increase the spice's value, research shows.

Health officials indicated that tests show children who consumed the pouches had blood lead readings up to eight times higher than the reference level, sparking significant concern. Additionally, officials said samples of the puree showed lead contamination more than 200 times higher than FDA limits.