THE SCAMMER OF SALAMANCA – How a former MCA broker wreaked havoc on an entire industryDecember 25, 2016 | By: Sean Murray
Last year, one small business owner pinged an expert online to see if a company named Corporate Restructure Inc. was legitimate, according to a question published on JustAnswer.com. The poster, who was anonymous, said the company offered to take his short term loans and extend them out to a 48 month term by filing an injunction to freeze out the lenders based on the unlawful interest rates.
An expert, Ely, who is a verified attorney on the website, issued a blunt response. “I’m sorry, but this is a scam,” he said. It looks like Ely was right. Just one year later, Corporate Restructure Inc. would be referenced in a criminal complaint that called for the arrest of one Sergiy Bezrukov, a resident of Salamanca, a small town in upstate New York with less than 6,000 people. Bezrukov, who goes by many aliases including John Butler, Thomas Paris and Christopher Riley, has been charged with mail fraud after a joint investigation between the Department of Homeland Security, the IRS and the US Postal Inspection Service.
Some of his purported 100+ victims received advertisements that claimed his company could reduce a merchant’s short term debt by as much as 75% in just 6 to 12 hours. But after the victims paid for the service, the negotiators didn’t actually do any negotiating. And worse yet, the victims were told to stop making payments to their lenders and merchant cash advance companies, putting them in breach of their agreements.
According to federal agents, “the victims and losses are the direct result of Bezrukov’s scheme involving the mailing of thousands of fraudulent solicitations to vulnerable small business owners, luring them into paying him for a service he never intended to provide, and resulting in hundreds of defaulted loans, worth hundreds of thousands of dollars.”
At the time of this being written, Bezrukov sits in jail pending trial, his bail denied after being deemed a flight risk. Investigators recovered $400,000 in cash that he had hidden, a sign that he may have been planning to skip town. More troubling was Bezrukov’s claim that the duplicate copy of his passport is missing and cannot be surrendered to the authorities. Even then, his dual Ukranian citizenship and penchant for using aliases were what sealed the deal for the judge who agreed he should remain in custody.
The details behind his arrest, which were covered by deBanked on November 2nd and The Buffalo News on October 31st, tell only part of the story, that Bezrukov mailed fraudulent solicitations, collected payments and left merchants high and dry without any attempts to negotiate their debts. If he engaged in other dubious acts, the three federal agencies who took him down didn’t accuse him of such in their complaint. It’s no surprise really, considering his scheme had so many layers.
Bezrukov has not been accused of other crimes so what I’m about to share is purely informational, a series of events and documents that appear related to what he already got arrested for. The scope of my disclosure and research had to consider potential conflicts of interest, perceived or otherwise, while considering the sensitivity of pending litigation and the parties or witnesses who are involved in them. Many names have been omitted even if their statements are public. I did attempt to contact two people connected with Bezrukov, one of his former employees who he sued, and an individual that may have been his girlfriend and colleague at Corporate Restructure. Neither responded.
Two of Bezrukov’s alleged victims, small business owners who were still unknown to authorities at the time, reached out to me for help after finding my original coverage of Bezrukov’s arrest online. This happened after this particular story had already gone to print so no mention of them were made. One of these victim’s stories followed the exact playbook I had uncovered.
Bezrukov was a mastermind and thanks to public records, I was able to follow his paper trail online and with that, a maze of Native American tribes, suspicious legal filings and accusations that will make you wonder what the hell was really going on in upstate New York.
One MCA player reached out to me last year after a suspicious stream of pro se lawsuits began making the rounds in the industry that alleged among other things, that commercial finance companies had made illegal payday loans. Pro se means that the merchants were purportedly representing themselves in court against funders without an attorney. The complaints they filed used inflammatory language and were riddled with spelling errors, but notably, they were all exactly alike, making it obvious that these were fill-in-the-blank templates originating from a single source.
I reviewed more than 40 such dockets and found references to Corporate Restructure Inc., Sergiy Bezrukov or his alleged aliases in several. In summary, here’s what happened:
Corporate Restructure, supposedly hired by merchants to negotiate or eliminate debts, would file a lawsuit against a funder on a merchant’s behalf using NYSCEF, New York State’s electronic filing system. Doing this doesn’t actually eliminate anything and it’s not how one would normally open a negotiation. Instead, funders are served with a summons and complaint, and they are directed to answer or move to dismiss. Some funders struck back with counterclaims, kicking off a complex commercial litigation which put merchants in a precarious position given that Corporate Restructure was not a law firm and could not legally represent them. Despite this, the debt negotiators, posing as the merchants, would attempt to litigate the cases. And that’s where the journey gets crazy.
In one of these cases, Bezrukov (while apparently pretending to be a merchant) tried to quash a subpoena filed by a real attorney by arguing incoherently that the funding company had “access to the use of deadly force to intimidate or eliminate [the] confidential informants” and therefore should be granted a protective order.
That’s not language you see every day in a civil case.
In the same document, Bezrukov, while still pretending to be a merchant, says the funder’s attorneys should have to travel to the Seneca Indian Reservation in Salamanca, NY, where the alleged confidential informants live, and that the informants are not very confidential at all because the informants are named Thomas Paris and Emily Goldstein (aliases that Bezrukov and his girlfriend often used).
Confusing tangential arguments about killing informants and the like, in a civil case that was supposed to be about an allegedly disguised payday loan, not only baffled judges but also merchants who would later discover such affidavits filed under their name and without their knowledge.
In May 2016, the actual merchant in the above case signed an affidavit to clear everything up with the court. In it, he said that Thomas Paris (aka Bezrukov) and his girlfriend held themselves out as debt counselors for Corporate Restructure Inc. and that they would be his legal counsel, upon which they began charging him for “various unexplained fees” while filing a lawsuit and other allegations in his name without his knowledge or consent.
“I have learned that Paris and Goldstein are not the real names of the people that I dealt with, that Corporate Restructure is not a real company, that they are not licensed to practice law in any state, and that they do not operate with any authority granted by the court of the State of New York,” the merchant swore after realizing he had been scammed.
The part about the Seneca Indian Reservation that Bezrukov rambled about would later become his calling card. Without the assistance of an actual attorney, lawsuits filed by Bezrukov on behalf of merchants he pretended to be, soon began including verifications from a supposed tribal member of the Seneca Nation of Indians affirming the merchants’ claims to be true, as if this somehow would serve in lieu of an attorney.
“I am a supervising non-attorney paralegal under my business Seneca BPO and I assist the plaintiff herein,” is what a typical verification affidavit accompanying a lawsuit would state.
One judge in November took particular issue with these verifications. “This purported verification is utterly meaningless,” she wrote. “[The tribe member] is not an attorney, and this document is unsworn,” suggesting that the merchant should get an actual licensed attorney to represent them.
However fruitless these attempts were to deflect attention away from Corporate Restructure to a Native American tribe, the circumstances quickly escalated when multiple funding companies caught on to the scheme and sued Bezrukov himself.
In June, a lawsuit filed against Bezrukov and his companies was answered, but it didn’t come from him. Instead, someone representing themselves to be a member of the Seneca Nation of Indians said that he is the real defendant, not Bezrukov. “I am a member of the Deer Clan […] and this is an attack on my land and my ancestors lands and invasive attack on my employee John Butler (aka Bezrukov) living on the reservation land and under my jurisdiction,” the response reads. While claiming sovereign immunity, he added for good measure that if someone wanted to sue them, they’d have to take it up with the Cattaraugus Territory Tribal Peacemakers Court.
Also included was the copy of an Asset Purchase Agreement signed by Bezrukov under his real name that purportedly transferred his business to a Seneca Nations tribal member. It’s not me, I sold the business to a Native American tribe, was apparently Bezrukov’s fallback position when funders figured out what he and Corporate Restructure were up to.
Another lawsuit filed around the same time against Bezrukov and his companies was answered by a different tribal member. “I am a member of the Hawk Clan,” he asserts, while going on to voice the same outrage about it being an attack on his ancestor’s land. That case is also still ongoing.
One clue Corporate Restructure left behind in NYSCEF is that at least 25 merchants who filed lawsuits, did so electronically using an @foxmailnow.com email address, a domain created in 2016 that no longer exists. Five separate lawsuits also seem to have accidentally included a printout in the documents that revealed an IP address, which a simple online search traced back to Salamanca, NY. This seems like too much of a coincidence for merchants who were supposedly representing themselves all across the country.
Even more suspicious is when a home care business in Aynor, SC filed a lawsuit against one funder while attaching the contract of an acupuncture business in Brentwood, NY with another funder as the supporting exhibit. The owners were completely different too. How could that inadvertently happen unless a third party was orchestrating everything on their behalves?
More damning still was the lawsuit purportedly filed by a merchant on their own that accidentally included pages of communications from Corporate Restructure.
If Bezrukov and his associates were truly out there practicing law without a license, he should be worried. Adam Atlas, a licensed attorney in New York, who was not speaking in reference to this particular case, told deBanked in an email that practicing law without a license in the state could result in a Class E felony where the act results in a loss of $1,000 or more. “Aggrieved parties could also pursue civil claims against the alleged unlicensed practitioner,” he wrote. “I don’t think these rules are there simply to protect the monopoly of lawyers in legal advice; instead they are there to ensure that the public is being served by a duly qualified and licensed professional when the professional holds themselves out as a New York attorney,” he added. “As licensed lawyers, we are officers of the court and duty-bound by ethical obligations that the public expects us to uphold.”
AN ATTORNEY RESIGNS
One lawyer apparently felt that his prior work with Bezrukov crossed that duty-bound line. A little over a year ago, an attorney who worked for and represented his companies resigned “after certain business practices” came to light, an affidavit states. He was apparently so concerned and distraught that he even reported himself to the attorney grievance committee.
The war Corporate Restructure waged on a niche financial industry leaves many questions. For instance, why bother to file lawsuits against funders if the motivation behind the scheme was to simply defraud merchants and take their money? And why this industry?
Perhaps Bezrukov’s own frustrations as a previous industry insider were a factor. A source says he started off as a merchant cash advance broker as far back as 2008, where he began with a desire and drive to make big money.
Fast forward a couple years and Bezrukov, who was already using the alias John Butler, was the owner of NY-based broker Fastsource Capital, LLC, court records indicate. A former employer sued him for $500,000 back in 2012 on the basis that he allegedly profited off of stolen trade secrets. Four years later, the case is still ongoing. One of the original accusations his former employer made is that he posed as them and fraudulently entered into a contract with a merchant on their behalf.
Of all the merchant cash advance companies owned by Bezrukov, SBC Telecom Consulting Inc. (which doesn’t appear to have had anything to do with telecoms), may have garnered the most publicity. Part of that stems from a judgment he won on default against one of his former employees for violating a non-compete, among other similar claims. The damages sought were so big ($45 million) that it got reported on in a legal blog. “A cash advance company lodged a suit in New York state court on Friday seeking more than $45 million in damages from a former call center manager who allegedly stole clients and proprietary corporate information and steered accounts over to its competitors,” Law360.com wrote in May 2015.
A year before that, SBC offered $5,000 to anyone willing identify the person who posted a complaint about them on Ripoffreport.com. SBC later sued a former employee they believed was behind the post, seeking $12 million in damages for among other things, libel. Perhaps all the legal wrangling whetted Bezrukov’s appetite to later pretend to be a lawyer himself, because just as the judge was ruling in favor of the former employee in December 2015, Bezrukov’s debt settlement scheme was already underway.
His victims were not only small business owners, but also lenders and MCA companies he previously competed against. During his reign of terror, he used at least 30 different business names and directed the processing and movement of funds through at least 10 different banks, federal agents allege. He even opened up a P.O. box at the Salamanca Post Office to receive mail for multiple companies including SBC and Corporate Restructure, exhibits show.
MAIL FRAUD AND BANK FRAUD IN WESTERN NEW YORK
The arrest warrant for Bezrukov states, “Since at least December 26, 2015 and continuing through at least October 7, 2016 in the County of Erie, in the Western District of New York, the defendant did knowingly commit Mail Fraud, in violation of Title 18, United States Code, Sections 1341 and 2.” He was arrested on October 27th, as were two other individuals connected to the scheme who were charged separately with bank fraud, Mark Farnham of Buffalo and Dustin Walker of Salamanca. Walker was Bezrukov’s Chief of Security and Farnham served as his Vice President. Both have been released on bond.
Federal agents say the primary responsibility of the two accomplices was to travel throughout the Buffalo metro area opening bank accounts and making deposits and withdrawals in furtherance of the scheme.
Just a week before the arrests were made, another small business owner pinged an expert on JustAnswer.com. “I’ve been contacted by a company called Native Corp Restructure from West Seneca New York with an offer to restructure my 3 merchant loans, reducing debt of $100,000 to $25,000,” they wrote. “Sounds too good to be true. What do you think?”
The very same Ely that fielded a similar question the year before, responded and asked for more information. The merchant said the company was formerly known as Corporate Restructure and that he was communicating with a debt advisor named Chris Riley, another alias of Bezrukov’s.
“This is a scam,” Ely wrote. He was right again.
deBanked first reported on Bezrukov’s arrest on November 2nd in a blog post titled, A GIANT BUFFALO ‘BILL’: Fake Debt Settlement Company Allegedly Defrauded Merchants, Business Lenders and MCA Companies Out of Lots of Cash. The above story is slightly different than the one that appears in print. Changes were made for conciseness and clarity.
Bezrukov is innocent until proven guilty.Last modified: December 25, 2016
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.