You feel like you’re in danger of going under and you’re doing your damnedest to dig out of the hole, but the ship is sinking. Your back is against the wall, and you’re being faced with reality. It’s painful, and it’s stressful, and it sucks, but you’ve got to do something. So, it looks like you’ve got advances from a few of those MCA funders. Each of them is pulling money out of your account every day. Each advance probably has its own unique sets of terms, like daily debits and lengths of agreement. You might have different funders with specific requirements or demands. Can you negotiate with them all at the same time? Yes, you can. But who negotiates for you, and how, is a big issue here. Many companies will claim they can help, and some of those companies have ended up in court.
Funding Metrics, an MCA company, sued 14 individuals and two companies in federal court, including Decision One Debt Relief, for running a “nationwide illegal debt restructuring scheme through numerous acts of mail and wire fraud,” according to the complaint. Funding Metrics filed suit in the Southern District of Florida for interference with its merchant customers and to seek financial damages for state and federal crimes in six claims.
The complaint asserts that Decision One and its affiliate, D1 Servicing, are marketing to merchants the ability to renegotiate and restructure their funding agreements with Funding Metrics and other merchant lenders. They promise, for instance, that the merchants can safely stop paying their cash advance funders; that the company will come to their aid immediately; that it will cut their debt by 60 to 80 percent or more; and that they will have a Veritas insurance policy to cover legal expenses from their defaults once the funders exercise their rights under the agreements, which the complaint says they inevitably will.
According to the complaint, the merchants then began to default on their payments to their funders, and - at Decision One’s request - send their payments to Decision One instead of their funders. And the complaint goes on to say that Decision One doesn’t even expect to get results for its clients. To the plaintiffs, the arrangement is both a fraud on the merchants and a tortious interference with the funding contracts. These are allegations in a civil lawsuit; there is no criminal accusation against Decision One, but the lawsuit seeks to recover damages resulting from alleged violations of various criminal statutes, including RICO.
Similar Fraud Schemes
Back in late 2016, the owner and employees of an upstate New York debt settlement company were arrested. They were supposedly charging merchants money to restructure their merchant cash advances, and then not doing any actual work. Sergiy Bezrukov, the company owner, has been charged with money laundering, bank fraud, mail fraud, wire fraud, and conspiracy to defraud. He spent almost two years awaiting trial in a Niagara County, New York jail, and he faced up to 30 years in prison. Two of the employees, Vanessa Cardona and Dustin Walker, pled guilty, Cardona to bank fraud and Walker to conspiracy to commit bank fraud. Bezrukov is accused of taking in a total of just $1.2 million over the life of the company.
Since then, nearly a dozen major lawsuits have been brought by MCA companies against other debt settlement companies purportedly running similar fraud schemes. In New Jersey, for instance, a company called Corporate Bailout LLC once garnered a spot on the cover of the New York Post as ‘the craziest office in America’. Corporate Bailout has been sued by Yellowstone Capital and Everest Business Funding. The matter was very public: Corporate Bailout ended up paying 500,000 dollars to the two MCA companies.
Decision One was also first paired with MCA Helpline in a lawsuit brought by Everest Business Funding. In February Everest withdrew the claims against Decision One specifically, deciding the two were unrelated. The suit against MCA Helpline went on. And just at that time a Decision One representative said the company was on track to do more than 100 million dollars a year in business. So the companies offering to negotiate with all your funders can be large operations, not only small ones.
A Warning in This Story for Anyone with Multiple MCAs
There’s a warning in this story for anyone with multiple MCAs: Beware the company that tells you not to pay every funder and to send all the money to it. That was the basis of the accusations. Once you stop paying, the contracts aren’t suddenly invalid, and as the complaint pointed out, funders can exercise their rights under the terms. The deal that includes a promised cut like 60-80%? Watch out for that. And what about that insurance product that makes you safe from the consequences of default? Be careful with that, too. You should never work with someone making false promises to you in exchange for money.
There is nothing inherently wrong with negotiating with multiple advance companies. In fact, there are many business owners looking to take this route since they have stacked their advances. But the lawsuits here demonstrate what happens when this is done without an eye to the outcome: merchants default, pay a middleman, and face funders. Ask your questions. Find out what happens to each agreement. Don’t let a promise be all you have.
