On September 15, 2023, Justice Borrok of the New York County Commercial Division issued a decision in People v. Richmond Capital Group LLC, 2023 NY Slip Op. 50975(U), holding that agreements were usurious loans, not merchant cash advance agreements, explaining:
There are no issues of fact that the MCAs were loans, not a legitimate purchase of accounts receivables. The Predatory Lenders made no secret of this. They advertised themselves as lenders making small business loans where most loans are completed and money your business account within 48 hours. Indeed, according to Ram, as a private lender, Ram Capital Funding takes pride in investing in projects that traditional banks may deny or may take months to approve. Indeed, the risk of loss associated with ownership of the Borrower’s account receivable never passed to the Predatory Lenders. Pursuant to the MCAs, the Borrowers were required to send bank statements to the Predatory Lenders. Although the MCAs provided for mandatory reconciliation of the daily amounts collected with the amounts of accounts receivable actually received by the Borrowers following receipt of such bank statements—as if the transactions were sale transactions—this was a total sham.
The Predatory Lenders either admit that mandatory reconciliation never occurred or invoke the Fifth Amendment privilege against self-incrimination. The business records of Actum also confirm that it never occurred. These MCAs were always understood to be based on fixed payments over a fixed finite term. Indeed, the text message exchanges between Messrs. Braun and Reich (of RCG and Ram, respectively) confirm that Messrs. Braun and Reich, acting in concert, discussed and made deals based on the amount of time that their money would be outstanding — i.e., a fixed term where the daily payment sweep of the Borrower’s bank accounts reflected fixed constant repayments over a fixed term, not based on any purported amount of receivables purchased. Lastly, although the MCAs indicate that a Borrower’s failure to make payments because it went bankrupt would not constitute a breach of, or default under, the MCAs (provided that no other breach occurred), this too was a sham. The Predatory Lenders made sure that their Borrowers were in default on Day 1 of the MCAs by requiring that the Borrowers falsely represent that the collateral (i.e., the accounts receivable) was free and clear of all other loans. The Predatory Lenders knew this was false. The Predatory Lenders knew that their money was behind other lenders as to the pledged accounts receivable. The Addendum to the MCAs also makes clear that a few missed payments constituted a default. Additionally, Section 2.9 of the MCAs makes clear that any encumbrance of the collateral would make the full amount immediately due and payable and that the Predatory Lenders could enforce the personal guaranties that they required the Borrowers to provide. Thus, bankruptcy never relieved the Borrowers or the guarantors of their obligation under the MCAs or the guaranties. Inasmuch as missed payments constituted a default (and given that based on missed payments, Mr. Braun called a default and instructed his co-conspirators to file Confessions of Judgment based on such payment defaults against the individual guarantors), it does not matter that the individual guarantors’ guaranty of their business’ MCA was a guaranty of performance and not of payment. The record makes clear that the Predatory Lenders made sure that they were getting repaid no matter what and that the risk of actual ownership of the accounts receivable never passed to the Predatory Lenders.
There are no issues of fact that these Loans were usurious. Indeed, in one case interest of over 3000% was charged. There is no evidence in the record that any of the massive fees charged were legitimate, such that these fees must be characterized as interest (which fees and other upfront costs the Predatory Lenders had falsely advertised did not exist). But even if the fees and upfront costs were not recharacterized as interest (as they should be), these Loans were criminally usurious by charging interest at a rate far above the legal limit.
(Internal quotations and citations omitted).