Articles by deBanked Staff
Wannabe Business Lender Sentenced to Six Years in Prison
August 11, 2021
Justin Cheng’s website said his company, Celeri Network, could help business owners get a loan between $5,000 and $5 million. Rife with all the familiar lingo commonly found on loan broker websites, Celeri Network gave the appearance of an everyday small business finance company.
Unfortunately for unsuspecting customers, Cheng took his own approach with applicants, telling them that they had to pay upfront refundable “due diligence fees” to help them secure funding. Of course, when the funding never came through, he failed to deliver refunds to the tune of $380,000.
That was only the tip of the iceberg for Cheng who was sentenced to 72 months in prison this week for a litany of schemes including this one.
According to the Department of Justice, “Cheng used the identity of other individuals to submit online applications to the SBA and at least five financial institutions for a total of over $7 million in government-guaranteed loans through the SBA’s PPP and EIDL Program for several companies controlled by CHENG, namely Alchemy Finance, Inc., Alchemy Guarantor LLC d/b/a “Celer Offer,” Celeri Network, Inc., Celeri Treasury LLC, Wynston York LLC, and Neo Bellum Industries Inc.”
Representing also that he had more than 200 employees when he never had more than 14, he successfully secured $2.8M in PPP funding altogether.
“Cheng transferred over $1 million abroad, withdrew approximately $360,000 in cash and/or cashier’s checks, and spent at least approximately $279,000 in PPP loan proceeds on personal expenses,” the DOJ found. “These personal expenses included the purchase of an 18-carat gold Rolex watch for approximately $40,000, rent and move-in fees for a $17,000 per month luxury condominium used by CHENG, approximately $50,000 of furnishings for the condominium, a portion of the purchase of a 2020 S560X4 Mercedes, and purchases totaling approximately $37,000 at Louis Vuitton, Chanel, Burberry, Gucci, Christian Louboutin, and Yves Saint Laurent.”
Far from finished, Cheng also announced the launch of a blockchain-based peer-to-peer lending platform and sold more than $400,000 in digital tokens through “materially false and misleading statements and omissions.”
“Cheng, 25 of New York, New York, pled guilty on April 20, 2021, to one count of major fraud against the United States, one count of bank fraud, one count of securities fraud, and one count of wire fraud,” the DOJ said.
LoanMe Now Officially Part of NextPoint
August 11, 2021
The Canadian SPAC deal to merge LoanMe with Liberty Tax was finally completed last month after being announced in February.
The combined entity, NextPoint Financial, trades on the Toronto Stock Exchange under the ticker NPF.
“In just over a year from establishing this SPAC, we have closed two acquisitions that immediately create a financial services company with scale and opportunities for synergistic growth,” said Andy Neuberger, Chairman of NextPoint Financial. “With a management team and board comprised of proven executives and operators across the financial services, digital and retail sectors, we have very quickly created an organization that is set to impact how financial services are delivered to North America consumers and small businesses.”
The deal is especially significant in the small business finance space since it will place LoanMe’s small business loan and merchant cash advance products into 2,700 Liberty Tax storefronts throughout North America.
New York’s New Governor
August 10, 2021Now that Governor Cuomo is leaving office early, the Lieutenant Governor, Kathleen Hochul, will become his replacement. This detail is relevant given that New York’s landmark legislation (SB 5470) for the small business finance industry is slated to go into effect on January 1st.
Hochul served as Erie County Clerk and as a member of Congress. She’s also long been an advocate of small business.
While running on Cuomo’s ticket in 2018 for Lieutenant Governor, she criticized her opponent in a controversial campaign ad by saying that he couldn’t be trusted to manage the state budget because he had defaulted on a small business loan.
SB 5470 is expected to be so restrictive, that at least one small business finance provider has already fled the state.
Loans Canada Announces Online Lending Survey Results
August 9, 2021
Loans Canada published their annual online lending survey results on Monday morning. The company polled online personal loan applicants throughout Canada.
Among the results, several statistics stand out.
40.8% of respondents said that they felt “pressured” to fill their loan application quickly, a compelling counter to the mainstream narrative that borrowers are demanding speed.
44.8% of respondents said they felt “pressured” to accept credit building services even though 85.3% of applicants that had been rejected for an online personal loan said they had been rejected on the basis that their credit score was too low.
Loans Canada noted large swaths of satisfaction and dissatisfaction alike, finding that applicants that have never been able to get approved for an online personal loan were highly likely to rank the online borrowing experience as “very bad” while those that have been approved were highly likely to rank the online borrowing experience as “good” or “very good.”
AMEX: Kabbage to be the “Landing Point” for Small Businesses
August 5, 2021
Now that American Express has put “Kabbage to work” with a business checking account offering, the company shared what’s next during the Q2 earnings call.
“..what you’ll see ultimately is the Kabbage platform being the landing point for small businesses,” AMEX Chairman and CEO Steve Squeri said. “And the way you want to think about this is fintech with scale. And so when you think about Kabbage, which is a pure-play fintech in the small business space and you think about American Express and the small businesses, and you combine that together, you have a fintech at scale. Not a fintech growing at scale, a fintech growing from scale with a balance sheet. And so that has always been the vision of Kabbage. As you bring Kabbage into the bank holding company structure, you have to do some other things to future proof it, if you will, and that’s what we’ve been doing. But that’s what you will see.”
Shopify Capital Originated $363M in MCAs and Business Loans in Q2
August 4, 2021
Shopify Capital originated $363M between merchant cash advance and business loans in Q2, bringing the first half total to $671.6M.
“Not only does Shopify Capital help fuel our merchants’ growth,” said Shopify President Harley Finkelstein in the quarterly earnings call, “our data tells us that merchants that accept Capital stay with Shopify longer as they succeed on the platform and take more of Shopify’s other solutions, namely Shopify shipping, apps, themes and domains and maybe most importantly, extending capital when their business needs it, reinforces the trusted relationship that we have with our merchants, one that goes beyond what they have with their bank or any other vendor. When we talk about Shopify’s flywheel, this is exactly what we mean.”
Shopify Capital is in the same league as rivals Square and Enova in terms of small business financing volume. Square Loans originated $1B for the first half, for example, while Enova has originated $722M.
Square Loans (Formerly Square Capital) Originated $627M in Small Business Loans in Q2
August 4, 2021
Square Loans, the lending arm of the fintech bank Square, originated $627M of its Flex Loans in Q2, according to the company’s latest announcement. That brings the year-to-date total to $1.02B across 167,000 loans. The numbers produce a rough average of only $6,000 per loan.
“After pausing flex loan offers from early March to late July of 2020, we continued to expand loan offers during the second quarter behind improvements in underlying Seller GPV trends, nearing pre-pandemic quarterly origination levels for core flex loans,” the company said.
Square is on pace to meet or eclipse its pre-covid volume. (It originated $2.3B in 2019.)
Square touted much bigger news in the past few days, however, its planned acquisition of Australia-based Afterpay in a $29B all stock deal.
Merchant Cash Advance Contract Terms Explained
August 3, 2021A Merchant Cash Advances is a sale of future receivables, not a loan. To learn the difference, watch this.
Below are three terms that are important to understand:
