Investing.com — New York Attorney General Letitia James announced a settlement with Yellowstone Capital and its principals, a network of 25 lending companies accused of predatory practices. The settlement involves a $1.065 billion judgment against Yellowstone. The company will cancel $534 million in unpaid debts by small businesses, while also paying $16.1 million in restitution to affected businesses.
Predatory lending companies, under Yellowstone’s control, targeted small businesses with illegal high-interest loans. More than 1,100 businesses in New York state and more than 18,000 nationwide were affected. These companies will now receive debt relief and the funds paid by Yellowstone will be distributed among them.
The remaining $514 million from the judgment will be borne by Yellowstone companies. The attorney general’s office accused Yellowstone and its executives of exploiting small businesses with predatory lending, leading to the closure of successful businesses and job losses.
The lawsuit against Yellowstone CEO Isaac Back (AS:), Chairman Jeffrey Reece and the Yellowstone entities were deposed in March 2024. The Office of Attorney General (OAG) investigation found that Yellowstone disguised fraudulent loans at high interest rates as advances of merchant funds. These advances provide a form of short-term, high-interest financing for small businesses that cannot obtain loans from traditional banks.
The lawsuit will continue against Delta Bridge Funding and Cloudfund, the companies that took over Yellowstone’s operations in 2021, and eight others involved in the loan operation. This includes Yellowstone co-founder David Glass. Before trial, Attorney General James settled with five individuals who paid $3.37 million to distribute to the affected companies. These people have also been banned from the merchant cash advance industry.
Under the settlement, Yellowstone entities are required to cease any attempts to collect balances owed by businesses to which they have lent. They must also drop pending actions to enforce them, vacate unsatisfied court judgments and terminate certain liens on small business property. Businesses and executives will also be permanently banned from the merchant cash advance industry.
Affected small businesses that have a court order or lien pending against them from Yellowstone will receive information by mail on how to request their dismissal. This request must be made within the next six months. Business owners who would like more information about the regulations can find it on the MPC website.
The settlement with Yellowstone is the latest action taken by Attorney General James to protect small businesses from fraud. In February 2024, a judgment of more than $77 million was obtained against Richmond Capital Group, Jonathan Braun, and its affiliates and officers for similar fraudulent practices. In April 2023, two websites impersonating the New York State Department of State and significantly overcharging prospective small business owners were shut down.
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