If that's true, LivingSocial is in a world of hurt.

For one thing, the debt deal described by PrivCo CEO Sam Hamadeh is on loan-shark terms. He says LivingSocial took convertible debt. That's debt which the lenders have the right to convert into equity under certain conditions—but it's still debt.

Hamadeh says the debt has a 4x liquidation preference. That means that if LivingSocial ends up being worth anything in a sale, the new investors—sorry, creditors—will get the first $440 million, not just the $110 million they put in.

According to the PrivCo report, the new infusion of cash essentially wipes out founders, employees, and executives who hold common shares or options. It also reprices earlier investment rounds, making the $823 million Amazon and others had previously put in essentially worthless.