- 1A judge reclassified 19 MCAs totaling $10.8 million as loans.
- 2The advances were made to Kossoff PLLC between 2016 and 2020.
- 3The Chapter 7 Trustee argues the transactions were criminally usurious and void.
A judge in a New York bankruptcy case has reclassified 19 merchant cash advances, worth $10.8 million in total, as loans.
The ruling came in a 36-page analysis issued on Monday. The case was filed by the Chapter 7 Trustee for the Kossoff PLLC estate, who sued an MCA funder. The advances at issue were made to Kossoff PLLC between 2016 and 2020.
The trustee's argument
The Trustee's complaint contends that the advances were criminally usurious and should therefore be treated as void ab initio, meaning invalid from the start. The recharacterization is the first step toward that outcome, because a usury claim depends on the transactions being loans.
What is not yet clear
The summary of the ruling does not describe the court's reasoning, name the funder or say what remedy follows from the reclassification. The full decision is available for anyone who wants the court's analysis.
Source reporting: deBanked.
