Jonathan Braun, a marijuana trafficker turned business loan manager, was sued by the New York attorney general for allegedly cheating on small businesses with false promises, threats of violence and interest rates several times higher than the legal limit.
Braun’s companies have collected more than $ 77 million in payments on illegal loans, sometimes charging more than 1,000 percent interest, according to a civil lawsuit filed in Manhattan state court Wednesday. The record indicates that he told one borrower, “Please be grateful that you are not in New York, because your family would find you floating in the Hudson,” and threatened another, saying, “I’ll take your money from you. girls “.
The United States Federal Trade Commission also sued Braun on Wednesday in federal court in Manhattan, alleging false statements to customers and illegal debt collection practices.
Braun did not operate in an alleyway. He advanced money to small businesses across the country from the Manhattan offices of Richmond Capital Group LLC and used the state’s court system to collect his debts. New York Attorney General Letitia James said in a statement his office began its investigation after a series of Bloomberg News 2018 on Braun and other small business lenders.
“It is inconceivable that these modern day loan sharks not only attacked hard-working business owners with bogus loans, but that they threatened violence and kidnapping,” James said in the statement.
In addition to Braun, New York is suing three companies it claims are associated with Braun – Richmond Capital, Ram Capital Funding and Viceroy Capital Funding. She is also suing three other people: Robert Giardina, owner of Richmond and Viceroy; Steve Reich, owner of Ram; and Michelle Gregg, director of Richmond and Viceroy.
The state is seeking restitution and damages of at least $ 77 million and the cancellation of all outstanding loans in Richmond. The FTC is also seeking restitution for customers.
John Meringolo, an attorney who has represented Braun, declined to comment, and other attorneys who have worked for him did not immediately respond to the messages. Reich’s lawyers Giardina and Gregg did not immediately respond to calls and emails.
Braun, 37, founded his business while on bail for trafficking in marijuana and wearing an electronic monitoring bracelet. He pleaded guilty in 2011 but was free for eight years. Prosecutors continued to allow delays for reasons they did not explain in open court. Rivals said Braun often boasted that he would never go to jail. In May 2019, he was sentenced to 10 years in prison in the marijuana case, and in January, he reported to federal prison in Otisville, New York.
Braun’s industry is called merchant cash advance. Almost completely unregulated, it has grown to around $ 15 billion a year. New York State caps annual interest rates at 16%. Cash advance companies get around this by saying that they don’t make loans but buy a company’s future income at a discount.
In the lawsuit, New York said this loophole would not protect Braun because his advances were in effect loans. Braun and the companies have made more than 3,000 illegal loans since 2015, when he was under the supervision of probation officers, according to the filing. On a $ 10,000 loan, according to the lawsuit, he demanded $ 19,900 in 10-day payments, which equates to an interest rate of nearly 4,000 percent, 250 times the legal rate.
Braun berated borrowers in vulgar rants, according to the lawsuit. An episode not mentioned in the record was captured in a video broadcast in the cash advance industry last year. It is not known when it was filmed or if Braun knew it was recorded.
“Tell everyone that your wife is for [expletive] sale, ”Braun said on the video, two Red Bulls sitting on his desk. “I don’t care what you do. Go get the [expletive] money.”
One of the tactics Braun used to collect his debts was called an admission of judgment. Borrowers are often required to sign one before obtaining a cash advance. And by signing, they agree to lose if there is a dispute with the lender.
Armed with this paper, lenders can go to court, get judgments against borrowers without telling them, and then seize their assets. Representatives of Richmond Capital made false court documents to obtain judgments, according to the New York lawsuit. State lawmakers banned the New York court system from accepting admissions of judgment against out-of-state borrowers in 2019 after Bloomberg News reports.
Richmond, Viceroy and Ram all reportedly went out of business last year, according to an affidavit filed in July 2019 by Giardina, which challenged a subpoena from the attorney general. He also said in the affidavit that federal and state criminal investigations have targeted Richmond employees since last year. He did not say which agencies.
Braun was “fired” from Richmond Capital in December 2018, according to a separate affidavit filed by Giardina in an unrelated case. But he hasn’t left the cash advance industry. According to a lawsuit filed against Braun by a rival last year, he resurfaced in a new company, High Five Group LLC.
High Five was apparently still in business last week. It was then that he filed an admission of judgment against a Rockland County borrower. A High Five lawyer did not immediately comment.