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Attorney General James Sues Predatory Lender That Threatened Violence and Kidnapping, and Illegally Collected Millions from Small Businesses

AG James Seeks to End Abusive, Illegal Lending Practices and Bring Relief to Merchants in New York and Nationwide

Richmond Companies Issued Fraudulent, Sky-High Interest Loans to Small Businesses, with Annual Interest Rates in the Hundreds and Thousands of Percent,  One Nearing an Annual Interest Rate of 4,000 Percent

NEW YORK – New York Attorney General Letitia James today filed a lawsuit seeking to stop three New York City-based companies and the owners and managers of those companies from continuing to cheat small businesses in New York and across the country out of millions of dollars each year by selling these small business owners “merchant cash advances,” or fraudulent, sky-high interest loans. In papers filed in New York County State Supreme Court, Attorney General James charges the three companies — Richmond Capital Group, Ram Capital Funding, and Viceroy Capital Funding (the Richmond companies) — with illegally loaning money to small business owners at astronomically-high interest rates, fraudulently charging undisclosed fees, debiting excess amounts from merchants’ bank accounts, and obtaining judgments against merchants by filing false affidavits in New York State courts. Additionally, Richmond Capital and Ram Capital are being charged with harassing and threatening merchants with violence and legal action, in an attempt to force them to pay off the loans. The lawsuit — filed after an 18-month-long investigation — alleges that the companies have, since 2015, collected over $75 million on more than 1,900 fraudulent, illegal loans.

“Small businesses are the backbone of our economy, so it is unconscionable that these modern-day loan sharks not only preyed on hardworking business owners with fake loans, but threatened violence and kidnapping,” said Attorney General James. “While small businesses may not always have the tools to protect themselves from unscrupulous actors, my office is determined to use every tool at its disposal to protect small businesses from these illegal fraudsters, and will fight to get every penny back.”

In addition to charging the three Richmond companies, today’s lawsuit also charges four of the companies’ principals: Robert Giardina, owner of Richmond and Viceroy; Tzvi “Steve” Reich, owner of Ram; Michelle Gregg, a director of Richmond and Viceroy; and Jonathan Braun, who worked closely with Giardina, Reich, and Gregg to lead the Richmond Companies’ merchant cash advance operations. 

The merchant cash advances issued by Richmond, Ram, and Viceroy are a form of short-term, high-interest funding for small businesses. Merchant cash advances have grown in popularity in recent years, particularly for businesses that cannot get small-business loans from traditional banks. But, in the lawsuit, Attorney General James alleges that the Richmond companies’ merchant cash advances are in fact illegal, high-interest loans with astronomical and illegal rates. The companies charge and withdraw fixed daily amounts from merchant’s bank accounts, typically ranging from $149 to $14,999; and these amounts do not change from day to day. The Richmond companies also collect these loans over short repayment terms, such as 60 days. As a result, the annual interest rates of the loans regularly exceed 200 percent and many times exceed 1,000 percent — a clear violation of New York State’s usury laws, which dictate that annual interest rates cannot exceed 16 percent.   

In fact, in one instance — alleged in the lawsuit — the Richmond companies loaned $10,000 to a merchant and required this small business and its owner to pay back $19,900 through only 10 daily payments of $1,999. As a result of the large daily payments and the short, 10-day repayment term, the annual interest rate for the merchant cash advance, including fees, came close to 4,000 percent — almost 250 times the legal interest rate.

Additionally, an affirmation filed with the lawsuit highlights the companies’ fraudulent and illegal conduct, including ways in which the respondents have harassed and threatened merchants that have been unable to afford these hefty daily payments. Braun has called business owners and has insulted, sworn at, and bullied them, demanding payment and making threats such as, “You have no idea what I’m going to do,” and “I will take your daughters from you.” Braun also threatened that he would come to one merchant’s synagogue in Brooklyn and physically beat him and “publicly embarrass him,” stating, “I am going to make you bleed.” He threatened another, “Be thankful you’re not in New York, because your family would find you floating in the Hudson.” 

The lawsuit charges the Richmond companies with regularly misrepresenting the amounts of money they would provide as merchant cash advances, the existence and amount of the fees they would deduct from the cash advances, and the amounts they would deduct from merchants’ bank accounts as daily payments. 

The Richmond companies also have required merchants to sign “confessions of judgment,” the lawsuit states, which are affidavits the companies then filed in New York courts to obtain immediate court judgments against the merchants — with no notice to the merchant, no review by judges, and no other evidence apart from the Richmond companies’ own affidavits. With New York court judgments in hand, the Richmond companies would then quickly seize money from merchants’ bank accounts. The lawsuit contends that the Richmond companies applied these tactics to obtain judgments against more than 400 merchants. 

Many of the affidavits the Richmond companies have filed in court are false, as the suit alleges. The affidavits have misrepresented the nature of the merchant cash advances — passing them off as transactions with varying, contingent repayment amounts, instead of illegal loans with fixed daily payments — and have falsified the amounts paid by merchants and the amounts still due. Having relied on these false affidavits, New York courts have repeatedly issued judgments against the small businesses and in favor of the Richmond companies.

The lawsuit goes on to allege that the Richmond companies have destroyed small businesses and harmed their owners through their abusive practices. Merchants have been forced to take desperate measures to cope with debt from the Richmond companies’ merchant cash advances, including taking out new cash advances to pay off their existing debts. This cycle of debt has ruined businesses, including a plumbing business in Virginia that took out a cash advance from Richmond, paid off the debt by taking out additional cash advances, and eventually was forced to close its doors after being in business for 30 years.      

Attorney General James’ lawsuit — filed in the Commercial Division of New York County State Supreme Court — seeks, among other relief, a court order barring the Richmond companies from continuing their fraudulent and illegal conduct, restitution and damages for merchants injured as a result in the amount of at least $77 million, and an order canceling all ongoing merchant cash advance agreements with the Richmond companies. 

The lawsuit alleges that the Richmond companies have committed civil and criminal usury, in violation of General Obligation Law § 5(501) and Penal Law § 190.40; issued high-interest loans and charged excessive interest without a license, in violation of Banking Law §§ 340 and 356; engaged in fraud and caused merchants to enter unconscionable agreements, in violation of Executive Law § 63(12); and engaged in harassment in the second degree and aggravated harassment in the second degree, in violation of Penal Law § 240.26.

In addition to all the charges against the Richmond companies, the lawsuit alleges that Braun managed the companies in their illegal scheme while he was under the supervision of the United States Probation Department. Braun was convicted of felony drug trafficking and conspiracy charges in federal court in Brooklyn in 2011, but he remained free under federal government supervision in the years that followed. In January 2020, Braun finally began a 10-year sentence at the federal prison in Otisville, New York.

This lawsuit against the Richmond companies is part of a broader investigation by the Office of the Attorney General (OAG) into abuses by companies in the merchant cash advance industry. The OAG began this investigation in November 2018, after publication of an investigative exposé into wrongdoings by merchant cash advance providers in Bloomberg News

Separately — but in coordination with the OAG — the Federal Trade Commission (FTC) also today filed a lawsuit against the Richmond companies and multiple principals at the Richmond Companies in federal court in Manhattan. The FTC has sued the Richmond parties for making misrepresentations concerning its financial products, unfairly using confessions of judgment, making unfair collection threats, and making unauthorized withdrawals from merchants’ bank accounts. Attorney General James’ action covers much of the same conduct, but also adds additional claims, including claims accusing the Richmond companies of charging annual interest rates in excess of New York’s usury laws. Additionally, Attorney General James has also asked the court to void the Richmond companies’ illegal loan agreements and order that they return to merchants all of the money they have illegally collected over the years.  

Since taking office, Attorney General James has repeatedly fought to protect New York’s small businesses. Earlier this week, Attorney General James won a major victory against Northern Leasing Systems, a company that trapped small businesses into overpriced, never-ending lease agreements for credit card processing equipment. The sweeping decision will deliver much needed relief to thousands of small business owners across New York and the rest of the nation, and will specifically void what are potentially hundreds of thousands of fraudulently-induced credit card equipment leases, vacate approximately 30,000 default judgments acquired against out-of-state fraud victims in New York City Civil Court, dissolve Northern Leasing Systems so the company’s fraud cannot continue, and provide restitution to small business owners who were deceptively and illegally induced into abusive and overpriced financing leases.

The lawsuit against the Richmond Companies is being handled by Assistant Attorney John P. Figura, under the supervision of Bureau Chief Jane M. Azia and Deputy Bureau Chief Laura J. Levine — all of the Consumer Frauds and Protection Bureau. An expert affidavit in the lawsuit was prepared by Data Scientist Chansoo Song in the Research and Analytics Department, under the supervision of Director Jonathan Werberg and Deputy Director Megan Thorsfeldt. The Bureau of Consumer Frauds and Protection is a part of the Division for Economic Justice, overseen by Chief Deputy Attorney General Chris D’Angelo and First Deputy Attorney General Jennifer Levy.