Charges Brought in Florida Payday Loan Fraud Case

Inside Subprime: October 22, 2019

By Grace Austin

A longtime Florida lawyer is in hot water for allegedly helping to keep a multimillion-dollar payday loan fraud scheme afloat.

A Fort Lauderdale-based attorney is accused of being part of a $330 million fraud scam and is being charged with securities fraud by federal prosecutors. That fraud scheme was reportedly being run by a Florida payday loan company. 

The U.S. attorneys prosecuting the case said the scam affected more than 3,600 investors across 42 states throughout the country.

The payday loan company is accused of practicing unlawful behavior when extending high-interest loans to small- and medium-sized businesses.

The payday loan company opened up shop in 2014 but filed for bankruptcy just four years later. 

As the SEC alleged, the payday loan company “used a network of sales agents to offer and sell unregistered securities to investors” promising them a “high-return, low-risk investment… in which [the payday loan company] would use investor money to make short-term cash advances called merchant cash advances to businesses that could not obtain more traditional financing such as bank loans.”

Instead, the company used the money to keep the business going and to fund its CEO’s lavish lifestyle.

The attorney reportedly provided “false legal cover,” acting as the outside counsel for the payday loan company, ultimately helping them to illegally raise funds. The attorney’s allegedly unlawful work with the payday loan company reportedly occurred from May 2016 to July 2018.

On two different occasions in 2016, the attorney authored opinion letters for 1 Global “falsely describing how its investments worked, and included misleading statements that omitted pertinent information,” according to a law.com article.

According to court documents, the attorney knew, “for example, that the investment was not, in reality, a 9-month investment but was instead longer in duration, that the automatic renewal aspect of the investment was omitted, and that in reality the investment was being targeted toward retail, non-sophisticated investors (such as IRA account holders).”

He was paid more than $600,000 by the company, which was generated from commissions made from the sales force.

The attorney, who is 74, has been practicing for decades in South Florida and with several prominent law firms. The attorney has “quickly accepted responsibility” for his part in the scheme, according to one of his defense counsels.

The attorney is facing up to five years in prison and civil money penalties. His case will be heard in the U.S. District Court for the Southern District of Florida.

In addition, the attorney was fired from his law firm after the alleged crime was found out.

Learn more about payday loans, scams, and cash advances by checking out our city and state financial guides, including Jacksonville, Miami, Tampa, Chicago, Illinois, Texas, and more.

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