Just days after New York Attorney General Letitia James formally secured a major court victory against three merchant cash advance companies, Richmond Capital Group, Ram Capital Funding, and Viceroy Capital Funding (the Richmond companies) and their principals, Jonathan Braun, Tzvi Reich, Robert Giardina, and Michelle Gregg, for harming small businesses through high-interest loans and undisclosed fees, the Federal Trade Commission has now also secured a major federal court victory against Braun, FAA News has learned.
Back on June 10, 2020, the Federal Trade Commission filed a lawsuit in the U.S. District Court for the Southern District of New York, naming as defendants RCG Advances, LLC (formerly known as Richmond Capital Group, LLC and also doing business as Viceroy Capital Funding and Ram Capital Funding); Ram Capital Funding LLC; Robert L. Giardina; Jonathan Braun; and Tzvi Reich.
The complaint alleges that, since at least 2015, the defendants have deceived small businesses and other organizations by misrepresenting the terms of merchant cash advances they provided, and then used unfair collection practices, including sometimes threatening physical violence, to compel consumers to pay. The FTC also has alleged that defendants have made unauthorized withdrawals from consumers’ accounts.
The defendants’ websites falsely claim that their cash advances require “no personal guaranty of collateral from business owners,” meaning that the people obtaining financing on behalf of companies would not have their personal possessions treated as collateral in the transaction. In fact, their contracts did include such provisions.
The defendants also require businesses and their owners to sign confessions of judgment as part of their contracts, which allow the defendants to go immediately to court and obtain an uncontested judgment in case of an alleged default. The complaint alleges that the defendants unlawfully and unfairly use these confessions of judgment to seize consumer personal and business assets, in circumstances not expected by consumers and not permitted by the defendants’ financing contracts.
The complaint alleges that the defendants make threatening calls to consumers, including telling one consumer that they would “break his jaw” if he did not make his payments and, in another case, threatening to ruin a consumer’s reputation by falsely accusing him of being a child molester, if he did not pay. (Additional court filings by the New York Attorney General allege that 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 defendants also fail to deliver the full amount of financing promised by withholding an array of upfront fees from the funds they deliver to customers, despite promising “no upfront costs” on their website, the FTC has alleged. The fees can range from hundreds to tens of thousands of dollars, and are either poorly disclosed in contracts or not disclosed at all. The complaint further cites internal company emails showing the defendants directing their agents to charge higher fees to consumers than allowed by the contract.
On June 14, 2021, the FTC filed an amended complaint alleging that the defendants made multiple unauthorized withdrawals from small businesses’ banks, sometimes taking thousands of dollars more than the agreed repayment amount.
The amended complaint also alleges that RCG, formerly known as Richmond Capital Group, LLC and also doing business as Viceroy Capital Funding and Ram Capital Funding, violated the Gramm-Leach-Bliley Act’s prohibition on using false or deceptive information to obtain a consumer’s bank account information.
In its agreements with consumers, RCG tells businesses that they can receive an upfront amount of cash in exchange for allowing RCG to make daily withdrawals from the businesses’ bank accounts up to a “Total Purchased Amount.” The amended complaint alleges that the defendants frequently continued to make the withdrawals well after the promised amount had been withdrawn, in one instance taking more than $75,000 without permission.
The amended complaint also alleges wanton and egregious behavior by defendants, including laughing at consumer requests for refunds from RCG’s unauthorized withdrawals from customer bank accounts; abusing the legal system to seize the business and personal assets of their customers; and threatening to break their customers’ jaws or falsely accusing them of child molestation during collection calls.
The amended complaint seeks for the court to assess civil penalties against the defendants, along with injunctive relief and requiring the defendants to turn over ill-gotten gains.
On January 5, 2022, the FTC entered into a Settlement Order that permanently banned RAM Capital Funding, LLC and its owner Tzvi Reich from the merchant cash advance and debt collection industries, and required them to pay $675,000 to settle Federal Trade Commission charges that they used deceptive and illegal means to seize assets from small businesses, non-profits, and religious organizations.
As part of the settlement, the defendants are being ordered to vacate any judgments against their former customers and to release any liens against their customers’ property. The order also banned these defendants from making these and similar misrepresentations, and from further violations of the Gramm-Leach-Bliley Act.
On June 6, 2022 the FTC additionally secured a court order that permanently bans RCG Advances, LLC and owner Robert Giardina from the merchant cash advance industry for deceiving and threatening small businesses and their owners. In addition, the court ordered RCG Advances and Giardina to make an upfront payment of $1.5 million and subsequent payment of more than $1.2 million to refund consumers.
Under the terms of the court order agreed to by the defendants in order to settle the case, they will be:
Permanently banned from the business financing and debt collection industries.
Required to vacate judgments and liens: The defendants are being ordered to vacate any judgments against their former customers and to release any liens against their customers’ property.
Prohibited from misleading consumers: The defendants will be prohibited from misleading consumers about any key facts about any good or service, including any fees, the total cost of the product, and other facts that reflect their deceptions in this case.
As the FTC previously obtained a court order in settlement with defendants RAM Capital Funding, LLC and Tzvi Reich, the only remaining defendant was Jonathan Braun.
Until today.
Senior Judge of the United States District Court for the Southern District of New York, Jed S. Rakoff, has just granted summary judgement to the FTC granting a permanent injunction against Braun, FAA News has confirmed.
The FTC also sought for the issuance of a monetary sanction against Braun. Judge Rakoff today denied to grant a motion for summary judgement as to monetary sanction against Braun. However, a future trial will be held on that matter.
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