- 1The SEC alleges two people solicited investors for an MCA funder without registering as broker-dealers.
- 2The scheme raised at least $47M from at least 87 investors before collapsing in mid-2023.
- 3The owner pleaded guilty to wire fraud; the brokers face Exchange Act Section 15(a) claims.
A civil lawsuit from the SEC against the orchestrator of an MCA funder that turned into a Ponzi scheme also names two other people the agency says "acted as unregistered brokers." The case is a reminder to anyone raising money for an MCA or business lender on someone else's behalf.
The broker allegations
According to the SEC's action, the two solicited investors, explained the terms, vouched for the investment, helped collect funds and received transaction-based pay without registering as broker-dealers or associating with one. They received commissions of 5% to 25% of the amounts they raised. Each faces a claim that they violated Section 15(a) of the Exchange Act, and the SEC wants them enjoined.
How the scheme worked
The funder was not a deal-by-deal syndication. Investors were told the owner alone would decide which deals to fund, and that merchant names were confidential. The funder solicited at least 87 investors and raised at least $47 million. It promised fixed returns of 22% to 53% on one-year investments and 9% to 10% on two- to three-month investments.
The owner, who pleaded guilty to wire fraud, allegedly misappropriated at least $11 million for gambling debts, credit card bills, home renovations, and mortgage and car payments. He also paid earlier investors with new investors' money. He funded some deals, but not many. The scheme ran for five years before collapsing in mid-2023.
Source reporting: deBanked.
