Investing.com — New York Attorney General Letitia James has announced a settlement with Yellowstone Capital and its officers, a network of 25 lending companies accused of predatory practices. The settlement involves a judgment of $1.065 billion against Yellowstone. The company will cancel $534 million in outstanding debts owed by small businesses, while also paying $16.1 million in restitution to affected businesses.
The predatory lending companies, under the control of Yellowstone, targeted small businesses with illegal high-interest loans. Over 1,100 businesses across New York state and more than 18,000 nationwide were affected. These businesses will now receive debt relief, and the funds paid by Yellowstone will be distributed among them.
The remaining $514 million of the judgment will be the liability of the Yellowstone companies. The Attorney General’s office has accused Yellowstone and its executives of exploiting small businesses with predatory loans, which resulted in the closure of successful companies and job losses.
The lawsuit against Yellowstone CEO Isaac Stern (AS:PBHP), President Jeffrey Reece, and the Yellowstone entities was filed in March 2024. The Office of the Attorney General (OAG) investigation revealed that Yellowstone had disguised fraudulent loans with high-interest rates as merchant cash advances. These advances are a form of short-term, high-interest funding for small businesses that cannot secure loans from traditional banks.
The lawsuit will continue against Delta Bridge Funding and Cloudfund, companies that took over Yellowstone’s operations in 2021, and eight other individuals involved in the lending operation. This includes Yellowstone’s co-founder David Glass. Prior to the lawsuit, Attorney General James settled with five individuals who paid $3.37 million to be distributed to impacted businesses. These individuals have also been banned from the merchant cash advance industry.
Under the settlement, Yellowstone entities are required to cease all attempts to collect on balances owed by businesses they lent to. They must also discontinue pending actions to enforce them, vacate unsatisfied court judgments, and terminate some liens on small businesses’ property. The companies and the officers will also be permanently banned from the merchant cash advance industry.
Impacted small businesses that have a court judgment or pending lien against them from Yellowstone will receive information by mail on how to request these be vacated. This request must be made within the next six months. Business owners seeking more information about the settlement can find it on the OAG’s website.
The settlement with Yellowstone is the latest action taken by Attorney General James to protect small businesses from fraud. In February 2024, a court judgment of more than $77 million was secured against Richmond Capital Group, Jonathan Braun, and their affiliates and principals for similar fraudulent practices. In April 2023, two websites impersonating the New York State Department of State and significantly overcharging aspiring small business owners were shut down.
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