Story Series: debt settlement

Debt Settlement Mastermind of MCA Industry Finally Caves, Pleads Guilty to Criminal Charges

March 30, 2019
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The mastermind that pioneered debt settlement in the merchant cash advance industry ended his career with a whimper last week. Sergiy Bezrukov pled guilty to Conspiracy to Commit Bank Fraud and Conspiracy to Commit Money Laundering. Bezrukov has been in jail for two years awaiting trial, which had been repeatedly postponed because he kept on firing his court-appointed attorneys. Eventually the judge and the prosecutors had enough and advised him the trial would begin whether he liked it or not.

Evidently, Bezrukov did not like it. With the help of his fifth and last court-appointed attorney, he pled guilty to charges that will carry a prison sentence of 57 to 71 months.

do not pass goDuring Bezrukov’s reign of terror, which began in 2015, he used at least 30 different business names (such as Corporate Restructure Inc.) and directed the processing and movement of funds through at least 10 different banks, federal agents alleged, while promising small business owners that he could reduce the cost of their MCAs or business loans by as much as 75% in return for a fee. Bezrukov carried out this scheme using several aliases, did not attempt to negotiate any debts, and pocketed the fees, leaving struggling small business owners in desperate situations.

Several layers of the scheme that deBanked uncovered, including his bizarre strategy of filing lawsuits in merchants’ names without their knowledge or consent and his attempt to legally shield himself behind Native American tribes, never resulted in any charges. Instead, prosecutors built a case around mail fraud, bank fraud, and money laundering, simple concepts that a jury would likely be able to understand.

Mailers from Bezrukov advertised that businesses prequalified for a substantial reduction in their merchant cash advance debt and that it could happen in as quick as 6-12 hours with the help of his restructuring service. Why would someone believe it? Well because he claimed he was a debt counselor that had resolved debts over 40,000 times before.

The end result is that Bezrukov and several co-conspirators, who have also since pleaded guilty to their own crimes, managed to swindle more than a million dollars while constantly changing their names to cover their tracks.

Bezrukov agreed to forfeit assets seized by law enforcement officials including but not limited to $393,000 in cash he had hidden inside computer hard drives. This and other recovered funds became the subject of intense discussion with the judge in Bezrukov’s last court hearing before pleading guilty. During that proceeding, Bezrukov begged the judge to release all of that money back to him so that he could replace his lawyer yet again and hire big firms to defend himself. He did not realize that the funds were being held to partially repay his victims.

Trial of Debt Settlement Mastermind Sergiy Bezrukov Postponed, Again

January 13, 2019
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The trial of debt settlement mastermind Sergiy Bezrukov has been postponed until April 1, 2019, court records indicate. The planned January 14 start date was just the latest in a series of postponements.

Bezrukov is charged with conspiracy to defraud, mail fraud, wire fraud, bank fraud, and money laundering. The charges carry a maximum penalty of 30 years in prison and a $1,000,000 fine.

Several of his co-conspirators have already pleaded guilty.

Bezrukov has been sitting in jail for more than 2 years waiting for the trial to begin. Bail was not granted because he refused to surrender his Ukranian passport to authorities, one of the two countries he shares dual-citizenship with. Bezrukov claims he lost it.

Trial of Debt Settlement Mastermind Sergiy Bezrukov Postponed

December 13, 2018
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The trial of debt settlement mastermind Sergiy Bezrukov has been postponed until January 14, court records indicate. The trial was supposed to begin on Dec 17 but a possible scheduling conflict with another complex trial taking place in Buffalo right now may be the reason for delay.

Bezrukov is charged with conspiracy to defraud, mail fraud, wire fraud, bank fraud, and money laundering. The charges carry a maximum penalty of 30 years in prison and a $1,000,000 fine.

Another Debt Settlement Defendant Pleads Guilty, Faces 30 Years in Prison

November 11, 2018
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behind barsMark Farnham, a co-conspirator in a high profile merchant cash advance debt settlement fraud case, pleaded guilty on Friday to conspiracy to commit bank fraud. He faces a sentence of 30 years in prison and a $1 million fine.

According to the Department of Justice, Farnham, along with others, used a number of fraudulent companies to mail solicitations to small business owners (victims) which fraudulently informed the victims that one or more of the fraudulent companies could assist the Victims with restructuring debts they had with other lenders.

Farnham is merely the latest to plead guilty in the scheme.

Vanessa Cardona – pleaded guilty to conspiracy to commit mail fraud. Facing 30 years in prison and a $1 million fine.
Dustin Walker – pleaded guilty to conspiracy to commit bank fraud. Facing 30 years in prison and a $1 million fine.

The ringleader of the debt settlement scheme, Sergiy Bezrukov, is scheduled to begin trial next month on December 17 in Buffalo, New York. Bezrukov has been in jail for over a year.

Bezrukov and his associates operated under many business names including Corporate Restructure Inc.

War on Debt Settlement Continues: 16 Defendants Sued in RICO Case

September 6, 2018
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Fourteen individuals and two companies (including Decision One Debt Relief) were sued by Funding Metrics in Federal court last month for allegedly “conducting a nationwide illegal debt restructuring scheme through numerous acts of mail and wire fraud.”

The suit, which stems from the defendants’ interference with Funding Metrics’ merchant cash advance customers, makes six claims, among them financial damages resulting from state and federal crimes. Per the complaint:

“Defendant Decision One (along with its affiliate/alter ego D1 Servicing) fraudulently presents itself as being able to renegotiate and restructure merchant agreements with Plaintiff and other funding companies. It has established a deceptive business practice of making misleading and often outright false representations to merchants under contract with Plaintiff promising that, with its help, these merchants will save money on those contracts by defaulting on them. Decision One tells merchants that they can safely stop paying cash advance funding companies like Plaintiff; that it will go to work for them promptly; that it can reduce their debt by 60-80% or more; and that they will be provided with a Veritas insurance plan to cover legal expenses arising from their defaults, once cash advance companies exercise their rights under agreements with their merchants, as they inevitably will. Based on these misrepresentations, the merchants default on their contracts with their funders – that is, at Decision One’s direction, they stop paying their funders and instead pay Decision One – although Decision One does not even expect to achieve results for the merchants. The result is a fraud on the merchants and tortious interference with the contracts Plaintiff have with them.”

The suit is just the latest bomb dropped on the exploding debt settlement industry. deBanked began covering the controversy surrounding debt settlement in late 2016 after the owner and employees of an upstate New York debt settlement company were arrested for charging merchants to restructure their merchant cash advances and then not actually performing any services. The owner, Sergiy Bezrukov, was charged with money laundering, bank fraud, mail fraud, wire fraud and conspiracy to defraud. Bezrukov has been locked away in jail for almost two years awaiting trial. He is facing a maximum of 30 years. Two of his employees pled guilty, Vanessa Cardona to bank fraud and Dustin Walker to conspiracy to commit bank fraud.

Since then, nearly a dozen major lawsuits have been filed by merchant cash advance companies against other debt settlement companies that are alleged to be carrying out similar schemes. One of those sued companies, NJ-based Corporate Bailout LLC, was featured on the cover of the New York Post last summer for being “the craziest office in America.” Corporate Bailout was sued by both Yellowstone Capital and Everest Business Funding which later resulted in a very public settlement agreement that forced Corporate Bailout to fork over $500,000 to the two MCA companies.

Decision One Debt Relief, sued now by Funding Metrics, was also originally a co-defendant alongside MCA Helpline in a lawsuit filed by Everest Business Funding earlier this year. In February, after determining the two were not related, Everest dropped the claims against Decision One only. The suit against MCA Helpline is still pending.

Around that same time, a representative for Decision One revealed to deBanked that the company was on track to be doing more than $100 million a year in business.

Bezrukov, by contrast, who currently resides in a Niagara County New York jail, is accused of having only obtained $1.2 million throughout his entire debt settlement venture’s existence. Although Decision One is not being charged criminally, the private civil suit alleges damages caused by a violation of criminal statutes including RICO.

The Funding Metrics suit against Decision One was filed in the Southern District of Florida under ID# 9:18-cv-81061.


Decision One Complaint

Details Emerge in Florida Lawsuit Against Corporate Debt Advisors

August 9, 2018
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debt cureA debt settlement company being sued by Itria Ventures in Miami-Dade County, FL was asked to prove its claim that it has managed over $1.5 billion in total debt, court records show. That company, Corporate Debt Advisors (CDA), advertises that it provides debt relief for small business owners.

CDA responded to Itria’s request on June 29th with information relating to just two employees, Tony Shea and John Philbin, who combined through their previous experience have purportedly managed $1,584,000,000 of debt.

Not mentioned in their response is that each individual is prohibited from engaging in debt settlement services with Florida consumers where Corporate Debt Advisors is located.

According to the Office of the Attorney General, both Shea and Philbin previously and independently settled with the State after being investigated for running questionable debt settlement businesses. (See here and here)

In the lawsuit filed against CDA by Itria, it’s alleged that CDA is advising merchants to commit fraud by moving money owed to Itria to a new secret hidden bank account at a local bank in Florida where it will be out of reach from Itria.

This is not the first time Corporate Debt Advisors has been sued. In early July, a competitor to Itria, High Speed Capital, petitioned a New York court to turn over funds it believes CDA has in its possession for unlawful budget planning services rendered to a Florida-based business.

MCA Funder Says Debt Settlement Company Operating Illegally Without a Budget Planning License

July 11, 2018
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lawsuit over moneyMerchant Cash Advance companies are on the warpath against debt settlement companies. In the latest legal offensive, High Speed Capital alleges that Corporate Debt Advisors’ debt settlement business is really just an unlicensed Budget Planning operation, a misdemeanor criminal offense in New York.

High Speed’s petition cites New York General Business Law § 455. “So-called ‘debt negotiation’ and ‘debt settlement’ companies that negotiate settlements between debtors and creditors on behalf of the debtors and which may coordinate or supervise payment by the debtors to the creditors in exchange for fees from the debtor are engaged in Budget Planning,” they say. “Budget Planning agreements with unlicensed entities are void for illegality and cannot be upheld by the Court.”

At issue in this action is that the transfer of funds from the merchant to Corporate Debt Advisors is allegedly fraudulent. High Speed won a judgment against the merchant in October 2017 and believes those funds belong to it. Corporate Debt Advisors has refused to send the funds in its possession to High Speed and has instead tried to negotiate. High Speed’s petition before the Court asks that Corporate Debt Advisors turn over the funds immediately to High Speed.

The case can be found in the New York Supreme Court, Erie County under Index #: 810673/2018. You can view the petition here.

Collector Says “No” to Debt Settlement Companies That Want His Data

June 19, 2018
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Shawn Smith - Dedicated Commercial Recovery

Debt settlement companies often find their leads by scouring through UCC filings, or publicly available forms that a creditor files to give notice that it may have rights to the property of a debtor. In the case of a small business, perhaps the refrigerators in a restaurant.

“[Looking through UCC filings] is a way of getting access to businesses that obviously owe somebody some money for their business,” said Shawn Smith, founder and CEO of Dedicated Commercial Recovery, a commercial collections company in Roseville, Minnesota.

But Smith told deBanked about another approach that debt settlement companies have taken to obtain leads of struggling businesses. He said they come to him.

“Who has a ton of accounts of struggling business owners?” Smith said. “Debt collection agencies that are working on behalf of funding sources. So [we] have like a list of all lists.”

Smith said that he gets approached by debt settlement companies looking for the contact information of struggling companies.

He always says “no.”

“They’re coming to me and saying ‘Hey, you know, for any merchant you send us that’s struggling, if we start working with them to help settle their debts, we will give you a large portion of the fee we make on settling that debt,’” Smith said. “And we of course would never do that.”

Dedicated works in two areas of collections: merchant cash advance and equipment leasing. In both cases, its goal is to recoup money for its clients, either merchant cash advance companies or equipment leasing companies.

Unlike this arrangement, a debt settlement company is not hired by a funding company. Instead, according to Smith, the debt settlement company searches for a struggling company, instructs the merchant to stop paying the funder and then approaches the funder with a settlement deal for often a fraction of what the funder is entitled to under the agreed upon deal. Smith said that settlement companies almost always propose to the funder: 20 percent of the value of the deal over five years.

Smith said he does work with debt settlement companies if they approach him representing a small business that can’t pay its bills, as long as what’s offered is within the range of what the funding company client would accept. Otherwise it’s a no-go. While Smith doesn’t share the names of struggling small businesses in exchange for kickbacks in the event of repayment, he’s convinced that this happens as he continues to be approached.

Founded by Smith in 2015, Dedicated has a staff of 18.