Articles by deBanked Staff
Princeton Alternative Income Fund Saga Devolves Into SEC Investigation, RICO Lawsuit
August 18, 2019The demise of the Princeton Alternative Income Fund has resulted in several ugly twists and turns. In addition to a slew of lawsuits, the bankrupt hedge fund is also being investigated by the Securities and Exchange Commission. Matthew Cantor, who is serving as the bankruptcy Trustee, cited the SEC’s probe as one of many reasons he filed a RICO lawsuit late last month against individuals and businesses formerly involved with the hedge fund.
Princeton’s trouble snowballed after the very public collapse of Argon Credit of which Princeton was a major investor. That in turn created a conflict with Ranger Direct Lending, a UK fund that had invested in Princeton. The end result is that Argon and Princeton filed for bankruptcy while Ranger was wound down.
Alan Heide, CFO Of 1 Global Capital, Hit With Criminal Charge & SEC Violations
August 15, 2019
Update: Alan Heide has pleaded guilty to one count of conspiracy to commit securities fraud.
The former CFO of 1 Global Capital, Alan Heide, was stacked with bad news on Thursday. The US Attorney’s Office for the Southern District of Florida lodged criminal charges against him at the same time the Securities & Exchange Commission announced a civil suit for defrauding retail investors.
Heide was criminally charged with conspiracy to commit securities fraud.
According to the criminal complaint:
It was a purpose of the conspiracy for the defendant and his conspirators to use false and fraudulent statements to investors concerning the operation and profitability of 1 Global, so that investors would provide funds to 1 Global, and continue to make false statements to investors thereafter so that investors would not seek to withdraw funds from 1 Global, all so that the conspirators could misappropriate investors’ funds for their personal use and enjoyment.
He is facing a maximum of 5 years in prison.
1 Global Capital CEO Carl Ruderman, who recently consented to judgment with the SEC, has not been charged criminally to-date. However, he is mentioned throughout the pleading against Heide as “Individual #1 who acted as the CEO of 1 Global.”
Civil charges were simultaneously lodged by the SEC.
According to the SEC’s complaint:
Although 1 Global promised investors profits from its short-term merchant cash advances to businesses, the company used substantial investor funds for other purposes, including paying operating expenses and funding Ruderman’s lavish lifestyle. The SEC alleges that Heide, a certified public accountant, for nine months regularly signed investors’ monthly account statements that he knew overstated the value of their accounts and falsely represented that 1 Global had an independent auditor that had endorsed the company’s method of calculating investor returns.
According to an SEC statement, Heide agreed to settle the SEC’s charges as to liability, without admitting or denying the allegations, and agreed to be subject to an injunction, with the court to determine the penalty amount at a later date.
1 Global Capital filed for bankruptcy last year after investigations by the SEC and US Attorney’s Office hampered their ability to raise capital. Ruderman’s recent settlement with the SEC put him on the hook for $50 million to repay investors.
1 Global Capital’s Carl Ruderman Consents To Judgment With The SEC
August 10, 2019Update 10/4/19: According to the docket, Ruderman has satisfied the judgment in full, with only the sale of his condo remaining.
The SEC’s lawsuit against Carl Ruderman, the former CEO of Hallandale Beach-based 1 Global Capital, has come to an end. He has consented to judgment in a settlement and the penalties are devastating, papers filed on friday with the Court show.
Specifically, Ruderman is liable for disgorgement of $32,587,166 representing profits gained as a result of the conduct alleged together with prejudgment interest on disgorgement of $1,517,273 and a civil penalty of $15,000,000. He must also sell his Condominium and disgorge 50% of the equity. Online real estate websites estimate his property to have 5 bedrooms, 8 bathrooms, and be worth in the range of $5,000,000 – $6,000,000.
1 Global Capital filed for bankruptcy last year after its business was hampered by investigations being conducted by the SEC and US Attorney’s Office. The SEC brought its case against Ruderman and his company a month later and alleged that it “fraudulently raised more than $287 million from more than 3,400 investors to fund its business offering short-term financing to small and medium-size businesses.” The investments were alleged to be unregistered securities and that millions of the funds raised from investors were misappropriated by Ruderman. The settlement stipulates that he does not admit or deny the allegations.
No criminal charges have been brought to date.
The SEC settlement was technically entered into in June but had to be reviewed and approved by the five SEC commissioners.
The unopposed motion for judgment was filed last week. It was signed by the judge on Monday, August 12th.
Funding Circle Originated $377M of US Loans in First Two Quarters of 2019
August 8, 2019Funding Circle originated $377M of loans in the US in the first six months of 2019, according to their latest public report. The company said that “growth was proactively controlled” and that they tightened higher risk band lending and increased prices. They’ve now loaned more than $2B cumulatively in the US since inception and their growth is being led by “new borrowers” that are being lured away from traditional lenders.
Funding Circle still lags behind PayPal, OnDeck, Kabbage, Square Capital, and Amazon in the US in loan origination volume, according to the deBanked small business finance rankings. Its closest competitors by volume are BlueVine, National Funding, and Kapitus.
Funding Circle Co-Founder & Managing Director James Meekings to Step Down
August 8, 2019
Funding Circle’s lackluster business performance has led to a casualty. Co-founder James Meekings, who serves as Managing Director of the UK Business (the company’s primary market), will be transitioning to a non-executive role on the UK board in Q3. He will no longer be MD, the company announced.
Lisa Jacobs, Funding Circle’s Chief Strategy Officer, will take over leadership of the UK business, the company subsequently disclosed.
Funding Circle went public less than 1 year ago on the London Stock Exchange. Since then the share price has plummeted by 75%.
The company has been busy trying to correct course through various maneuvers, one of which has been to cut CEO Samir Desai’s annual compensation.
Square Capital Originated $528M in Loans in Q2
August 5, 2019
Square Capital facilitated 78,000 loans for $528M last quarter, according to their recent earnings report, an increase of 36% year-over-year. Thr growth is the exact percentage increase experienced by rival Shopify.
Square says that they continued to see an average loss rate of less than 4% for their core Flex Loan product.
deBanked ranked Square Capital as the 4th largest alternative small business finance company of 2018. The company loaned $1.6B last year. PayPal was #1 at more than $4B. Shopify Capital is on pace to do more than $2B this year.
Shopify Issued $93M in MCAs and Loans in Q2, Has Begun Offering Funding to Non-Shopify Payment Customers
August 4, 2019
Shopify, a publicly traded e-commerce platform, is quickly growing its merchant cash advance and loan originations through its Shopify Capital brand. The company issued $93M in Q2, up 36% year-over-year and an increase from the prior quarter of $5.2M. Shopify’s loan product is only available in Arizona, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, North Carolina, South Carolina, Utah, Washington, Wisconsin, and Wyoming.
The company also recently began offering funding to merchants who don’t use Shopify Payments but still use the Shopify platform.
On the quarterly earnings call, Shopify CFO Amy Shapero said in doing so “we still have significant visibility into their operations, we see their orders, we see the engagement with the platform. And so, we are very comfortable moving in that direction.” The move provides an opportunity to expand their eligible market by 10%, she added.
Furthermore, Shopify’s deals are performing well, the company claims. Shapero said “we’ve actually managed our loss ratio in a very, very tight range. In fact, it’s lower than the top of the range where we think we could go with this, which says the power of our algorithms are working.”
Shopify Capital has originated more than $180M in 2019 so far, indicating they may be surpass many competitors in the rankings this year. The company originated $277.1M in 2018.
Clearbanc Raises $300M in a Series B
July 31, 2019
Toronto-based Clearbanc, a company founded on the idea of providing business owners with capital to purchase facebook and instagram ads in exchange for a percentage of their future sales, has raised $300M in a Series B. $50M of it is an equity investment led by Highland Capital. The other $250M will go into a fund that Clearbanc uses to fund small businesses, according to Fortune.
Clearbanc’s payment methodology is reminiscent of merchant cash advances and their factor rates range between 6% and 12.5%. Funding amounts range from $10,000 to $10M and the company is reportedly on track to fund $1 billion to small businesses.
Clearbanc President and co-founder Michele Romanow is a serial entrepreneur that is also a celebrity investor on the TV show series Dragon’s Den. She attributes the idea for Clearbanc to her experience on the show in which entrepreneurs were inappropriately seeking venture capital when it was really a specific type of working capital they needed, funds to advertise on facebook or instagram, for example.
The company was founded in 2015 in Toronto.
