A judge has ordered trustees to take over Marion "Suge" Knight's Death Row Records following the music mogul's file for bankruptcy earlier this year.
Marion 'Suge' Knight was shot at during a party last year
US bankruptcy judge Ellen Carroll said the rap label's accounting practices were in disarray and that there had been gross mismanagement.
"It seems apparent there is no-one at the helm," she said.
Mr Knight was not present at the Los Angeles hearing and his lawyer was unavailable for comment.
The producer filed for bankruptcy in April after he was ordered to pay more than $100m (£57m) to a former associate who said she had helped start the record label in 1989.
At the time, his lawyer, Laurence Strick, said his client was attempting to reorganise his financial affairs and that Mr Knight remained "optimistic" and "focused".
Knight's Death Row Records label, which he founded after a failed career as a football player, became a huge success in the early 1990s.
It boasted rap stars such as Dr Dre, Snoop Doggy Dogg and Tupac Shakur, and brought the so-called "gangsta" rap style into the mainstream.
Mr Knight has served jail time for assault and parole violations and was shot in the leg at a hip-hop party last year.