Articles by deBanked Staff
PAR Funding SEC Case Ends Mostly in Settlements
December 1, 2021Several defendants in the PAR Funding SEC case settled with the SEC prior to trial, court records reveal. The settlements require defendants to “pay disgorgement of ill-gotten gains, prejudgment interest of disgorgement, and a civil penalty.” Those amounts will be determined by the Court.
Two other defendants have elected to go to trial.
Broker Fair 2021 Registration Has Closed
November 30, 2021Broker Fair 2021 ended registration early this morning. The fifty three sponsors signed on represent the maximum that can fit inside the showcase room at Convene at Brookfield Place in lower Manhattan. We look forward to seeing everyone in the industry there in person!
The agenda can be viewed here.
You can already connect with other attendees using the mobile app. The email address connected to your ticket is your login.
Broker Fair Ticket Registration To Shut Off Any Day Now
November 28, 2021
Broker Fair 2021 ticket registration will shut off days before the December 6th event. The broker-centric conference is now officially counting down to its kickoff at Convene in New York City.
“This pretty much happens every time we put on a show,” said Broker Fair founder Sean Murray. “Even though this event is post-covid, we’re looking at the number of registrations so far and are very pleasantly surprised.”
Hundreds of small business finance brokers are registered to attend Broker Fair. The annual event first launched in 2018.
“I don’t know what day we’re going to disable registration yet, but based on the pace I’d say there’s no way we make it until Friday,” Murray said.
MJ Capital Now Alleged to Be $200M+ Ponzi Scheme
November 22, 2021
Ever since the SEC sued MJ Capital Funding, LLC in August, more information has been revealed about the potential size and scope of the alleged fraud. It was originally estimated that between $70M – $129M was raised by MJ Capital from over 2,150 investors. But now with access to the books and records, investigators believe it is much much higher.
“From the Receiver’s preliminary investigation, it appears that at least 5,500 investors were induced by Johanna Garcia and over 400 promoters to invest as much as $200,000,000 in this Ponzi scheme,” Court filings state.
If true, that would likely make it the largest fraud in the industry’s history. And it’s been a mess trying to recover the funds, it seems.
“Though several individuals have agreed to return funds and other assets to the Receiver, many others have not, and several continue to mislead the victims by counseling them not to register their claims on the Receiver’s website and advising them that the Receivership Defendants’ business will reopen and that is how they will be repaid.”
The loyalty that many investors feel towards MJ Capital’s former CEO is evident by the raw number of signatures attached to a Change.org petition to offer her sympathy and support. 3,243 names say they support her and her mission to unfreeze the money, which is not going to happen.
Those impacted appear confused as to why the company is in trouble in the first place simply because checks were still being sent out to investors at the time the SEC action took place.
The Receiver says that it’s because MJ Capital “had little in the way of actual MCA business, and could not possibly sustain the promised repayments to investors plus the ‘referral fees’ to promoters. Rather, they were paying these amounts with funds raised from new investors, in classic Ponzi scheme fashion.”
In other words, the checks were bound to stop coming eventually, because there was no actual underlying business.
The alleged fraud is now so large that the SEC has asked the Court for time to file an amended lawsuit. The judge has given them until February to file the documents.
ConstitutionDAO NFTs
November 20, 2021If NFTs can be used to capture a moment or experience, then there should be some already available to showcase the current state of the movement. Here are some that we have found:
IOU Financial Originates $52.2M in Q3
November 19, 2021
IOU Financial continued its growth trajectory this past quarter with $52.2M in small business funding originations. It was the company’s biggest month since inception.
“Our successful migration to a marketplace strategy has enabled IOU Financial to capture more volume in Q3 than would have previously been possible,” stated Robert Gloer, President and CEO in an official statement. “This has proven to be a win-win that has in turn given us the financial latitude to invest in growth initiatives and further reduce our corporate debt.”
The company was also profitable in Q3, though the company said this was “due in part to a reversal in its provision for loan losses and recoveries of loans previously written off, as well as a reduction in operating expenses due to the recognition of $1.5 million in employee retention credits.”
IOU’s customers have been in business for an average of 11.5 years and borrow $82,688 on average for a weighted average term of 11.9 months.
For the first 3 quarters of 2021, the company has originated $111.9M.
Buying the Constitution at $20 Mil? More Like $25 Mil
November 16, 2021
While crypto fans rally to hit a $20 million fundraising target in order to make a competitive bid for a copy of the United States Constitution on Thursday, lurking in the background is another cost, the auction house fees.
Known as the “Buyer’s Premium,” Sotheby’s charges 25% on the first $400k, 20% on the next $3.6M and $13.9% on the amount over $4 million, according to the auction terms.
That would mean that a $20 million winning bid would generate $3,044,000 in Buyer’s Premium Fees. And that’s before an additional 1% overhead premium equivalent to $200,000, bringing the house fees to $3,244,000.
Oh, and that’s not inclusive of the upfront sales tax of $1,775,000 (8.875% of the sales price).
All combined, the fees and taxes to take the $20 million haul off the premises, before transport, preservation, and security is: $4,819,000.
That means that the ConstitutionDAO would really need at least $25 million in its coffers in order to place a legitimate $20 million bid.
On Tuesday at 5pm EST, approximately 48 hours before auction time, the DAO had only raised 1,382 ETH, equal to about $5.87M. Sotheby’s starts the bidding at 6:30pm on Thursday at its location in NYC.
Time will tell if it is able to muster up the rest in time.
New York’s Fourth Judicial Department Affirms Its Settled Law That MCA Agreements Are Not Usurious
November 16, 2021
New York’s Appellate Division for the Fourth Judicial Department in the Supreme Court of New York issued a landmark decision for the merchant cash advance industry on November 12th.
By affirming the original decision issued in Kennard Law P.C. DBA Kennard Law and Alfonso Kennard v High Speed Capital LLC (Index No: 805626/2020), the Appellate Division agreed that among other things that it is settled law in New York that the underlying purchase and sale of future receivables agreement at issue in the case is not a usurious loan.
On June 10, 2020, plaintiffs filed their lawsuit against the defendant, asking the Court to vacate a confession of judgment on the basis that the defendant’s underlying contract dated back on August 24, 2017 was really an unenforceable criminally usurious loan.
The defendant moved to dismiss and the judge granted the motion, holding that:
1. Plaintiffs’ claim of usury is barred by the one-year statute of limitations applicable to usury based claims.
2. Plaintiffs have failed to plead a cognizable cause of action upon which to seek relief.
3. Plaintiffs have no recoverable damages.
4. Plaintiffs’ claims are barred by documentary evidence and settled law in New York holding that the parties’ underlying agreement was not a usurious loan.
Plaintiffs appealed, hoping that the Fourth Department would be persuaded by their arguments that the agreement was usurious. It wasn’t. Instead the Appellate Division unmistakably and unanimously affirmed the original judgment.
The decision demonstrates that there is consensus across judicial departments. Kennard in the Fourth Department (Western New York) is similar to Champion Auto Sales, LLC et al. v Pearl Beta Funding, LLC in the First Department (Manhattan and the Bronx) circa 2018.
Coincidentally, the attorney representing the losing parties, Amos Weinberg, is the same in both landmark cases.
The attorney representing High Speed Capital was Christopher Murray of Stein Adler Dabah & Zelkowitz, LLP.
