Payday lender ordered to pay $39 million in embezzlement lawsuit – Financial Services

July 22, 2022

Sheppard Mullin Richter & Hampton

To print this article, all you need to do is be registered or log in to

On June 29, a Florida court issued a final judgment against a Miami-based payday lender and its CEO resolving allegations that the defendants misappropriated funds from investors. According to complaint, the company fraudulently raised more than $66 million through the sale of promissory notes to more than 500 Venezuelan-American investors who were told the company would use their funds to fund payday loans through the offering and selling “safe and secure” promissory notes. . Investors were promised returns of up to 120%, but it was alleged that the company failed to generate revenue to cover its principal and interest payments due to investors.

The complaint also alleged that the CEO misappropriated funds from investors for personal gain and authorized the transfer of funds to friends and relatives with no apparent legitimate business purpose.

The company and the CEO have agreed to a final judgment under which they are permanently prohibited from trading in securities in the future and from committing further violations of the Securities Act and the Exchange Act. The company must also return $39 million to investors. The CEO is liable for approximately $4.5 million, which, if paid, will reduce the amount owed by the company by the same amount.

On July 13, the SEC filed new related charges against four company sales representatives for their role in soliciting dollars from investors in the unprofitable business. The lawsuit, filed in the Southern District of Florida, alleges the representatives sold more than $25 million in unregistered promissory notes to nearly 350 investors. None of the representatives were registered with the SEC as a dealer or were associated with registered dealers.

Put into practice : The misuse of investor funds in this particular case was particularly egregious. However, this series of enforcement actions should serve as a stark reminder that companies engaged in the sale of promissory notes must comply with federal and state securities laws at every stage and at all levels of employment, from sales representative to the CEO. The SEC, in particular, has signaled that it will vigorously enforce violations at both the corporate and individual level.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

POPULAR ARTICLES ON: Finance and Banking of the United States

Have I waived the terms of my contract?

McGlinchey Stafford

In that appeal, the Sixth Circuit Court of Appeals reversed and returned the decision of the District Court for the Northern District of Ohio, finding that the debt collector violated the Fair Debt Collection Practices Act. .

CFPB targets convenience fees

Cooley LLP

On June 29, 2022, the Consumer Financial Protection Bureau issued an advisory opinion stating that the Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors…

Rate article
( No ratings yet )
Add a comment