Articles by deBanked Staff
Prominent Attorney Criminally Charged In 1 Global Capital Mess
September 17, 2019
Another individual has been criminally charged in connection with the 1 Global Capital securities case. 74-year-old Jan Douglas Atlas, a securities attorney, was charged with 1 count of securities fraud by the US Attorney in South Florida on Tuesday for authoring opinion letters in 2016 that falsely described that the investments were not securities nor subject to federal securities laws or registration requirements.
The charges allege that Atlas “came to understand” that individuals representing 1 Global were not interested in accurate legal advice based on real facts and that they instead wanted false legal cover that would advance the desired outcome to continue to profit from 1 Global. He allegedly made false and misleading statements despite knowing the true nature of how the investments worked and that they were in fact securities as defined under federal securities laws.
“Atlas’s opinion letters were used and relied upon by 1 Global employees and agents to continue to raise money illegally,” the Department of Justice said in an announcement.
Atlas was also compensated by receiving a percentage of the commissions generated from the fundraising scheme to the tune of $627,000 paid to his personal checking account. These payments were not disclosed to his employer, Kopelowitz Ostrow, as required.
Atlas was also separately charged by the SEC.
His employer was not charged with any wrongdoing in either action. Atlas was previously listed as a partner at the firm but is no longer on the firm’s website.
Atlas is the second individual to be criminally charged in connection with 1 Global Capital. The first individual, Alan Heide, who served as 1 Global Capital’s CFO, pleaded guilty to conspiracy to commit securities fraud. He is scheduled to be sentenced on December 12th.
New SoFi Stadium To Host Rams, Chargers, Super Bowl & Olympics
September 15, 2019
SoFi’s appetite to reach NFL viewers is going above and beyond just Super Bowl commercials. The fintech company that started with student loan refinancing, has secured the naming rights to a new professional football stadium in Inglewood, California. SoFi Stadium, which opens in 2020, will host both the Rams and the Chargers. The stadium will also be home to Super Bowl 56 in 2022 and will serve as the venue for the opening and closing ceremony of the 2028 Summer Olympics.
Anthony Noto, SoFi’s CEO, served as CFO of the NFL for almost 3 years from 2008 – 2010.
In an interview with CNBC, Noto explained that the naming rights are more than just people coming to a game and seeing their brand there and that it will also give them a TV broadcast platform for all types of events the stadium hosts. It’s the ultimate advertising campaign, which the company believes they need to market their new products such as SoFi Money.
“Now that we have a complete suite of financial services […] we have to build awareness of those products, which requires us also to build trust, so being part of this iconic destination, allows us to elevate and accelerate how quickly we can get there,” Noto said.
The move could be perceived as too flashy or premature given how young and new SoFi is, but Noto says that the naming rights only make up about 10% of their marketing budget.
A single night of football, they estimate, would put them in front of 10-15 million unique potential customers, equal to all of their other total sponsorships they’ve done combined.
LA Rams Chief Operating Officer Kevin Demoff said during a separate CNBC interview, “I think when you look at someone like Anthony Noto, who was in part of the NFL, who understands the allure of football and what it brings to people on sundays, and throughout the nation and helps bring people together, but also right there the entertainment factor when you think about what can happen, on this field right below, I think it’s something that gives everybody a point of pride.”
Online Lender Wins Massive Arbitration Award After Retailer Challenged The “True Lender” Of The Loans
September 13, 2019
An arbitrator was unconvinced by a retailer’s arguments that business loans it obtained from Celtic Bank via Kabbage were responsible for the business’s eventual failure.
In 2017, NRO Boston, LLC and Alice Indelicato filed a lawsuit against Kabbage Inc. and Celtic Bank Corporation for allegedly violating Massachussetts’ usury law when the parties engaged in financing transactions years earlier. The complaint alleged that Kabbage’s relationship with Utah-based Celtic Bank was a “rent-a-bank” scheme that enabled Kabbage, as part of a sham, to piggyback off of Celtic Bank’s exemption from state usury laws. State chartered banks are typically not subject to state usury laws even in other states. The usurious loans it obtained from the parties, NRO argued, caused severe mental anguish, emotional distress, and financial strain which forced them to obtain even more loans from other lenders.
At the time, the National Law Review said this case exemplified the litigation risk inherent in using bank partnerships and that it was the latest example in the burgeoning area of “true lender” litigation.
Kabbage responded to the suit by enforcing its arbitration provision and the underlying litigation was stayed. The arbitration process proved to be extensive and expensive and tallied up more than 800 exhibits and 12 witnesses. On July 24, 2019, the arbitrator announced his decision, and it didn’t bode well for NRO Boston.
The difficulties the retailer encountered, the arbitrator wrote in his written decision, were caused by the owners’ inexperience, mismanagement of the business, the rapid expansion of the business, the assumption of millions of dollars of debt, and excessive owner compensation. NRO’s F rating with the BBB and the fact that the owners had paid themselves a whopping $1.3 million from 2010 – 2013, well in excess of industry averages, were reasons the business failed, the arbitrator wrote. Furthermore, Kabbage and Celtic Bank only accounted for 2.3% of NRO’s debt.
“The obvious conclusion, and I so find, is that Celtic and Kabbage and their business arrangement had nothing to do with the demise of NRO.”
More to the point, the arbitrator concluded that there was no merit to the allegation that Kabbage’s relationship with Celtic Bank was a “rent-a-bank” scheme.
As a result, Celtic Bank was awarded a grand total of nearly $3.3 million in legal fees, costs & expenses, and the outstanding balance owed on the loans.
On September 9, NRO filed a petition in federal court to vacate the arbitration award, in part because they believe the arbitrator engaged in a manifest disregard of the law. The matter is currently pending.
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Four Plead Guilty In Fake Business Loan Scheme
September 11, 2019
Four of the five loan brokers indicted in a fake business loan scheme have pled guilty to charges.
Toplica and his co-conspirators were alleged to have duped an Ohio victim out of hundreds of thousands of dollars in upfront fees, the title to 55 vehicles including a Ford Mustang, several dump trucks, several tractors, several restored classic vehicles, a Freightliner motor home, and trailers. The ruse was that the money was going towards upfront fees to secure a loan and the vehicles were to serve as collateral. In reality there was no loan.
Haki Toplica, the group’s ringleader, pled guilty to 4 counts of wire fraud and 1 count of conspiracy.
Kathryn De La Torre, Luisa Goris, and Robert Russo also pled guilty to various charges. The case against co-defendant Haider Islam is still ongoing. Sentencing for the 4 defendants is expected to happen in January.
IOU Financial Originates $38.5M in Q2
August 26, 2019IOU Financial originated $38.5M in loans in Q2, up from $32.8M the quarter before. The company said that the figure was actually a 31.8% increase over Q2 2018.
In a press release, IOU CEO Phil Marleau said, “IOU delivered strong loan origination and revenue growth in the second quarter of 2019 and continued to post positive earnings. We remain committed to our strategy of profitable growth which continues to deliver consistent and favorable results since its implementation.”
IOU is traded on the Toronto Stock Exchange and has a market cap of $19.3M.
For Sale: Three Loan Portfolios Held By Direct Lending Investments
August 19, 2019
The Court-appointed receiver of the now-defunct hedge fund, Direct Lending Investments (DLI), is gearing up to sell three loan portfolios with an aggregate par amount owed of $29.8 million. The portfolios comprise of business loans, consumer loans, and merchant cash advances.
An official notice of the proposed sale will be published in the Wall Street Journal and other publications. Bids on the portfolios are required to be submitted by August 29th. An auction may be conducted on September 5th.
Updates on the receivership process for DLI can be followed here.
The demise of Direct Lending Investments was sudden. The CEO resigned in March, shortly before the company was charged with a “long-running” fraud by the SEC. The company had apparently suffered a massive loss of investor capital due to a single failed investment. The investment was in VOIP Guardian Partners I LLC, a company that reloaned money to telecom businesses worldwide. VOIP filed for bankruptcy on March 11th.
