Articles by deBanked Staff
An MCA Debt Settlement Owner Arrested by FBI
May 8, 2024One of the alleged masterminds behind MCA Cure LLC, LDMS Group, LLC, and Evergreen Settlement Group LLC, was arrested by the FBI six weeks ago after inducing merchants to divert payments away from their MCA providers and then failing to negotiate with the funders.
The accused is Mark Csantaveri, who is named along with two unnamed co-conspirators from New Jersey. Both co-conspirator names were made easily discoverable by details disclosed by the FBI however. The debt settlement websites made claims that they had a “proven proprietary debt restructuring system” that could lower their payments by 80%. As part of the enrollment process, merchants were directed to send funds to an escrow account, for which the co-conspirators would then transfer to their own personal accounts.
According to the complaint, they would then claim to be negotiating with the funders and give updates about waiting to hear from attorneys and settlements. The charges are for Wire Fraud, Conspiracy to Commit Wire Fraud, and Money Laundering.
Csantaveri was immediately remanded to jail, was represented by a public defender and was only recently released on a $200,000 unsecured bond.
“Csantaveri and his conspirators misappropriated the victims’ money for their personal use, including over $1 million in gambling expenses,” the DOJ said. “Csantaveri’s scheme ultimately defrauded more than 50 victims of more than $3.4 million dollars.”
Conspiracy to commit wire fraud is punishable by a maximum of 20 years in prison and a fine of $250,000 or twice the gross gain or loss involved in the offense, whichever is greatest.
“MCA Debt Settlement” Company Sued
May 7, 2024A firm that offers to “restructure corporate debt primarily MCA or Merchant Cash Advance debt” was sued last month by a small business owner for fraudulent inducement, consumer fraud, unjust enrichment, breach of fiduciary duties, and for a declaratory judgment. Corporate defendants include MCA Resolve LLC and Coastal Debt Resolve (ABSM LLC) in addition to several individuals.
The alleged scheme, as laid out by plaintiff, asks business owners to pay huge fees to the debt settlement firm all while being forced to default on their business financing agreements on the hope that they might eventually get a proposal to settle for far less than the amount agreed. In this case, plaintiff explained that the result was that they actually ended up owing more because of how much defendants were charging. The case was filed in the Superior Court of Arizona and can be viewed here.
Notably, MCA Resolve LLC is currently being sued by two unrelated MCA funding companies in the New York Supreme Court.
Square Loans: $1.32B Funded in Q1, Expands to Japan
May 2, 2024Square Loans, a subsidiary of Block, originated 129,000 small business loans for a total of $1.32B in the first quarter.
“Strength in banking gross profit was driven by continued strong demand for loans and healthy repayment trends,” the company said. Loss rates also remained consistent with historical ranges.
The company also expanded its business loan program to Japan and it has so far exceeded their expectations.
“Clearly, quick access to funds and a seamless product experience are true differentiators relative to existing financing options for SMBs in Japan,” said Block CFO Amrita Ahuja.
Separately, Block CEO Jack Dorsey spent an inordinate amount of time talking about Bitcoin in the quarterly shareholder letter, his entire message in fact.
It opened up with the following quotation: “Why the hell are you all spending so much time on bitcoin?”
“We get this question a lot. We’ll use this quarter’s letter to answer it,” Dorsey wrote in response.
Enova Has Big Q1, Sees Strong SMB Market
May 1, 2024Enova originated $960M in small business loans in Q1 2024, setting what is believed to be a new quarterly record. During the earnings call, Enova CEO David Fisher said that confidence in the economy and consumer spending was driving the SMB market forward.
“Our small businesses aren’t concerned about inflation,” Fisher said. “Strong consumer spending and the ability to increase prices are offsetting that. And we are seeing stable performance in that portfolio.”
In fact, the company expects yield on the SMB side of its business to increase in the short term.
“We’ve just shifted more towards kind of the middle to upper end of our APR range for the SMB products,” said Fisher. “And so with those higher APRs from slightly higher defaults – so you’ll see over the next few quarters just slightly elevated compared to historic level default rates in the SMB business and eventually slightly higher net charge-offs as a percentage of ARR. But what will come along with that, is higher yields and higher revenue. And so the ROEs on those products, those originations are looking really, really good.”
Enova also expressed the value it’s gotten out of marketing its products on TV.
“We’ve gotten heavier and heavier in TV,” Fisher said. “That’s been an area of success for us for sure relative to say five to seven years ago, and I think certainly relative to our competitors. And then digital I think has improved for us in ways that we probably wouldn’t have guessed a few years ago. And a lot of that growth I think is kind of taking share away from leads. I think leads has continued to shrink as the share of the total, which was fine, we’d like to control our own destiny.”
California Launches its Own Business Loan Marketplace
April 28, 2024It’s a sign of the times. State and federal organizations are launching their own business loan marketplaces to compete with the numerous ones that exist in the private sector. The latest is California which just launched its “Small Business Loan Match” tool.
“We created Loan Match to ease the process of finding trusted loans for California entrepreneurs, gathering dozens of lenders on one platform for a one-stop experience,” the site says. “All lenders have been pre-vetted and enrolled in IBank’s Loan Guarantee Program, which specializes in bridging the gap between responsible lenders and small businesses.”
IBank, not to be confused with iBank, is the California Infrastructure and Economic Development Bank that was created to “finance public infrastructure and private development that promote a healthy climate for jobs, contribute to a strong economy and improve the quality of life in California communities.”
California follows New York City which launched NYC Funds Finder, the SBA’s Lender Match tool, the CFPB’s planned loan marketplace comparison tool, and Bank of America’s Access to Capital Connector.
Update on the Kris Roglieri Saga
April 24, 2024The trustee overseeing Kris Roglieri’s Chapter 11 bankruptcy case asked the Court on Tuesday to convert it to a Chapter 7. That’s because among the facts to come out of that and related proceedings thus far is that Roglieri did not ever maintain financial records for his various business entities, has no revenue coming in, and has no path to keeping his businesses going. The trustee also noted the added complexity of an FBI investigation and that the Receiver in a related civil case believes Roglieri owes creditors more than $100 million, funds that were allegedly derived from a ponzi scheme.
A Chapter 7 is a liquidation. The Court still has to approve it. A Chapter 7 trustee would have added powers that allows them to pursue assets for the benefit of creditors. The assets would be sold off.
Up until at least one month ago, Roglieri’s wholly owned business, the National Alliance of Commercial Loan Brokers conference (NACLB), was still soliciting for sponsorships. However, the ability to purchase tickets was shut off in early April and as of last week the conference website has gone completely offline. Roglieri previously attested that $436,237 was outstanding and due to Caesars Entertainment in Las Vegas for their 2023 conference. The Receiver in the Prime Capital Ventures case has also argued that the NACLB bank account had been the recipient of at least $20,000 in allegedly misappropriated funds and that $200,000 had been withdrawn from the NACLB’s bank account to aid in the present legal defense of Roglieri.
Nominate Yourself to Be on the Small Business Lending Advisory Council
April 21, 2024The SBA is forming a Federal Advisory Committee to “provide advice and recommendations to SBA on matters relating to small business lending, private sector innovation in the small business lending community, and policy impacting small businesses’ ability to access capital, especially in underserved communities.”
The 25-member council will include 17 members that are current or former representatives of small business leaders, community leaders, representatives of financial institutions, and members of the small business lending community. Might this be you?
“Nominees must have experience and technical expertise in such areas as commercial lending, small business finance, government-guaranteed lending, small business advocacy or advisement, and expertise needed to provide advice on SBA’s loan programs,” the guidelines say.
If you’d like the opportunity to be considered, you can read more here and apply by emailing LendingCouncil@sba.gov with the following information:
1. The first and last name of the nominee, as well as the nominee’s phone number and email address. (you can nominate yourself)
2. The nominator, including either the first and last name of the nominator and their current title, or the name of the organization.
3. The nominee’s state of residence.
4. A nomination letter, not to exceed 2 pages, that highlights the reason the nominee should serve on the Lending Council.
5. A summary of the nominee’s qualifications in a resumé or curriculum vitae, not to exceed 3 pages.
Are Interest Rate Cuts Not Actually Around the Corner?
April 18, 2024If you were planning on the current interest rate environment loosening up this year, it may be time to reconsider. Inflation is actually going back up, not down. Plus, unemployment is still relatively low and the stock market is near all time highs, with a new record having been set just recently! Even the media which had predicted a minimum of 3 rate cuts this year alone is changing its tune. If you don’t believe us, look:
4/17/24 – The Economist: America’s interest rates are unlikely to fall this year
4/17/24 – CNBC: Wall Street pushes out rate-cut expectations, sees risk they don’t start until March 2025
4/17/24 – Fox Business: Interest rate cut odds dwindle as inflation progress stalls
4/16/24 – Washington Post: The sobering message from the Fed: Interest rate cuts aren’t coming soon
4/15/24 – Axios: The U.S. may be entering a new era of persistently high interest rates
It could even go the other direction. According to CNN, “The Fed might not be done raising interest rates just yet.” Most companies in the industry by now had already adjusted to the current environment (if they’re still around), but it could continue like this for a long or even get more expensive. Prepare accordingly.