Legal Briefs

New York’s Fourth Department: Revenue Purchase Agreements Are Not Loans

August 25, 2023
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A lawsuit brought by Samson MCA LLC against Joseph A. Russo M.D. P.C./IV Therapeutics PLLC, DBA Aspire Med Spa & Joseph Russo & Marco V Beatrice has brought revenue purchase agreements back in to the legal spotlight in New York State. Once again its been affirmed that they’re not loans.

In May 2021, plaintiff Samson MCA sued defendants for breach of contract and won on summary judgment despite defendants’ contentions that the revenue purchase agreements at issue were actually “criminally usurious loans.” Defendant Marco V Beatrice appealed. After a very careful analysis of the agreements, a final decision was issued by the Appellate Division, Fourth Department on August 11, 2023.

“On appeal, [defendant] contends that the agreements are void because they are criminally usurious loans and that the court therefore erred in granting plaintiff’s motion and denying defendants’ cross-motion with respect to him,” the Court stated. “Thus, the central question before us is whether the two agreements were, in fact, revenue purchase agreements or whether they were, instead, loans.”

The Court said that when determining whether a transaction constitutes a loan, courts must determine whether the amount is repayable absolutely or under all circumstances:

“Usually, courts weigh three factors when determining whether repayment is absolute or contingent:
(1) whether there is a reconciliation provision in the agreement;
(2) whether the agreement has a finite term; and
(3) whether there is any recourse should the merchant declare bankruptcy”

Final decision:

Contrary to [defendant’s] contention, plaintiff established as a matter of law that the agreements were revenue purchase agreements rather than loans, and [defendant] failed to raise a triable issue of fact with respect thereto (see Principis Capital, LLC, 201 AD3d at 754). Here, the agreements submitted by plaintiff contained reconciliation provisions requiring the adjustment of the remittance amount upon request based on changes to the entity defendants’ revenues, and had no finite term and no payment schedule. Additionally, as noted, each agreement contained an acknowledgment “that [plaintiff] may never receive the purchased amount in the event that [the entity defendants’ business] does not generate sufficient revenue” and, for the most part, plaintiff did not have recourse in the event that the entity defendants declared bankruptcy (see Streamlined Consultants, Inc. v EBF Holdings LLC, 2022 WL 4368114, *5 [SD NY, Sept. 20, 2022, No. 21-CV-9528 (KMK)]).

We have reviewed [defendant’s] remaining contention and conclude that it does not warrant reversal or modification of the judgment.

The original lawsuit can be found under Index No. 129401/2021 in the New York Supreme Court.

Full decision by the Appellate Division, Fourth Judicial Department can be found here.

Former MBE Capital Partners, LLC CEO Sentenced to 4.5 Years in Prison

July 31, 2023
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behind barsRafael Martinez, the former CEO of MBE Capital Partners, LLC, is going to prison. The company was a PPP lender during covid but it was alleged it should not have been!

In March 2022, the DOJ said that “Martinez used false representations and documents to fraudulently obtain the approval of the SBA for his company, MBE Capital Partners, LLC, to be a non-bank lender through the PPP. Martinez then used that approval to obtain approximately $932 million in capital to issue PPP loans and earn over approximately $71 million in lender fees.”

Martinez then spent those funds on himself, purchasing a villa in the Dominican Republic, a Ferrari, and private jets.

He pled guilty to conspiracy to commit wire fraud exactly a year later. Last week he was sentenced to four and a half years in prison.

Celsius Founder Alex Mashinsky is Charged by DOJ, SEC, CFTC

July 13, 2023
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Crypto platform Celsius founder Alex Mashinsky has been charged by multiple agencies including the US Attorney’s Office for the Southern District for his role in a multibillion dollar fraud and market manipulation schemes. Although he has been referred to as a “crypto lender,” some of the most unusual stories surrounding the alleged fraud have to do with the customers. For instance, in the Celsius bankrupty proceeding, one customer pleaded for their funds back on the basis that they had yolo’d their entire EIDL funds into it.

“I placed my entire EIDL loan, $525,000 in Celsius to earn an APY to help pay back the 3.9% interest on the loan while I was in the process of deciding on if I would keep the EIDL or use it on my business,” the customer wrote. “I deposited these funds a few weeks after the Celsius rules changed on their ‘Earn’ accounts which required a user to be an Accredited Investor, which I was not.”

That victim’s story was publicized 12 months ago. At its peak, Celsius managed $25 billion of customer funds. The company declared bankruptcy in July 2022. Federal charges allege that much of the Celsius business was just a fraud run by Alex Mashinsky and another co-defendant.

The SEC and CFTC have also filed civil charges against Mashinsky.

New York Court of Appeals Dismisses Case That Challenged MCA Legality

June 13, 2023
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The New York Court of Appeals dismissed AH Wines Inc., et al. v C6 Capital Funding LLC. Its reasoning was brief.

“Appeal dismissed without costs, by the Court sua sponte, upon the ground that the issues presented have become moot,” the order says.

For a more complete understanding of the outcome, please contact an attorney.

Kate Fisher, Chris Murray Recipients of the Greg Nowak Impact Award

June 5, 2023
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AFBAThe Alternative Finance Bar Association selected two recipients for this year’s Greg Nowak Impact Award. They were Katherine C. Fisher, Partner of Hudson Cook, LLP and Christopher R. Murray, Managing Member of Murray Legal, PLLC. Winners are generally selected for their all-around efforts for the legal community both on matters of law and outside of it.

Greg Nowak, who passed away in 2021, was a partner of Troutman Pepper and a beloved founding member of the AFBA. The winner of last year’s award was David A. Picon, a Partner of Proskauer Rose LLP.

Register for The 5th Annual Alternative Finance Bar Association Conference

May 22, 2023
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The AFBA Conference is BACK.

AFBAIf you are an attorney in this industry, you won’t want to miss the Alternative Finance Bar Association’s (AFBA) 5th Annual Conference, here in NYC June 5-6. They will be covering current events in the legal world of alternative finance, including upcoming NY disclosure requirements, recent caselaw developments, latest in collections law, regulatory current events and a lot more. This is an extremely reputable bar association with top notch attorneys in the field.

For more detailed information & a registration link, click here:

Federal Judge: Legal Challenge to California’s Commercial Financing Disclosure Law Has Merit, Orders SBFA Case to Proceed

April 3, 2023
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court justiceA federal judge has ordered the Small Business Finance Association’s (SBFA) case against Clothilde Hewlett in her capacity as Commissioner of the California Department of Financial Protection & Innovation (DFPI) to proceed. On March 30, The Honorable R. Gary Klausner denied defendant’s motion to dismiss the claims that the State’s commercial financing disclosure law is both unconstitutional and preempted by the federal Truth in Lending Act (TILA).

The case, originally filed on December 2, 2022, argued, broadly speaking:

  • That the regulations violate the First Amendment on the premise that they compel the group’s members to make inaccurate disclosures to customers while at the same time prohibiting members from engaging in communications that could be used to clarify or correct the required false or misleading information to customers.
  • That APR is defined and governed at the federal level by TILA and that California’s own customized spin on it would only serve to confuse customers.

The Court has now ruled that these claims have been sufficiently alleged, allowing the SBFA the opportunity to prove its case.

Steve Denis, the Executive Director of the SBFA, told deBanked that the win at this juncture was validation for what the organization has been saying for the past few years.

“I think [this victory] is really good news. It’s a lawsuit that the entire industry should be behind,” he said.

The outcome of the case could have far reaching effects. New York, for example, has enacted similarly misleading APR rules that are soon slated to go into effect while other states have contemplated following in its footsteps.

“I think if we win this lawsuit the APR argument is over,” Denis said.

To that end, anyone in the industry that would like further information about what’s taking place can contact Denis at

The full ruling can be viewed here.

California DFPI Seeks to Dismiss Commercial Financing Disclosure Lawsuit

March 17, 2023
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Clothilde Hewlett, in her official capacity as Commissioner of the California Department of Financial Protection and Innovation, has asked the Court to dismiss the lawsuit over commercial financing disclosures brought by the Small Business Finance Association (SBFA). Both sides have entered in all their arguments (the DPFI filed its reply on March 13th.) It is now up to the Court to decide if the claims survive this stage of litigation.


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