ALBANY, N.Y. (AP) — A New York-based cash-advance operation exploited struggling small businesses across the country by issuing fraudulent, “predatory” loans at interest rates as high as 820%, New York Attorney General Letitia James alleged in a new lawsuit.
James filed the suit Tuesday against Yellowstone Capital, along with a network of related companies and people she says carried on its operations after Yellowstone purportedly shut up shop in 2021 while facing multiple investigations.
The operation, which allegedly rebranded as Delta Bridge, continued issuing illegal loans disguised as merchant cash advances, a form of short-term, high-interest funding for small businesses, the suit charges. One long-time Manhattan eatery, City Bakery, was forking over more than $2,000 a day and eventually shut down as a result, James’ office alleges.
“Yellowstone Capital, Delta Bridge, and the other companies pretended to offer a helping hand, but instead provided only illegal, ultra-high-interest loans,” said James in a statement. “Small businesses are the foundation of our economy, and they face severe challenges without also having predatory lenders taking advantage of them.”
Phone and email messages left with contacts listed for Yellowstone and Delta Bridge requesting comment were not immediately returned. The former owner of City Bakery, Maury Rubin, did not immediately respond to email messages requesting comment.
The lawsuit also names officials from the companies who negotiated and serviced the alleged illegal loans, including David Glass, who co-founded the company in 2019 after pleading guilty to insider trading charges. Messages left at phone numbers listed for Glass were not immediately returned.
James is asking for a court order barring Yellowstone, Delta Bridge, and their affiliates and officials from continuing the operation. She is also asking for a lifetime industry ban for Glass.
James says her office is seeking at least $1.4 billion for the impacted small businesses.
In 2020, federal regulators sued Yellowstone and its owners, alleging the company withdrew money from its customers’ bank accounts without permission. In 2021, the company agreed to surrender more than $9.7 million in funds to the Federal Trade Commission, which was later redistributed to the harmed businesses.
In 2023, the company and its affiliates reached an approximately $27 million settlement with the state of New Jersey to resolve allegations similar to New York’s.
Before filing the New York lawsuit, James reached settlements with five individuals involved in the Yellowstone scheme, which included $3.37 million for impacted businesses, according to her office.
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Maysoon Khan is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.
2024-03-05 23:19:00
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