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`Index No. 656880/2021
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`THIRD PARTY SUMMONS
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`::::::::::::
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`:::::::::::::::::::
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`SUPREME COURT OF THE STATE OF NEW YORK
`COUNTY OF NEW YORK
`PANTHERS CAPITAL, LLC
`
`Plaintiff
`
`-against-
`
`FRUIT STREET HEALTH INC and LAURENCE
`NATHANIEL GIRARD,
`
`Defendants.
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`FRUIT STREET HEALTH INC and LAURENCE
`NATHANIEL GIRARD,
`
`Third-Party Plaintiffs,
`
`-against-
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`PANTHERS CAPITAL, LLC, BENJAMIN
`ISAACOV, and the JOHN DOE AND JANE DOE
`INVESTORS,
`
`Third-Party Defendants
`
`TO: Benjamin Isaacov
` 157 Church Street
`New Haven, CT 06510
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`YOU ARE HEREBY SUMMONED to answer the complaint in this action, and to serve a copy of
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`your reply on the Defendants-Counterclaimants' attorneys within 20 days after service of this
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`summons, exclusive of the day of service (or within 30 days after the service is complete if this
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`summons is not personally delivered to you within the State of New York). If you fail to appear
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`or answer, judgment will be taken against you by default for the relief demanded in the complaint.
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`Date: December 28, 2021
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`Respectfully submitted,
`WHITE & WILLIAMS LLP
`
`Shane R. Heskin
`7 Times Square, Suite 2900
`New York, New York 10036
`(215) 864-6329
`heskins@whiteandwilliams.com
`Attorneys for Defendants/Third Party
`Plaintiffs
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`FILED: NEW YORK COUNTY CLERK 01/10/2022 04:35 PM
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`Index No. 656880/2021
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`VERIFIED ANSWER TO
`COMPLAINT, AFFIRMATIVE
`DEFENSES AND
`COUNTERCLAIM
`
` SUPREME COURT OF THE STATE OF NEW YORK
` COUNTY OF NEW YORK
`PANTHERS CAPITAL, LLC
`
`Plaintiff
`
`-against-
`
`FRUIT STREET HEALTH INC and LAURENCE
`NATHANIEL GIRARD,
`
`Defendants.
`
`FRUIT STREET HEALTH INC and LAURENCE
`NATHANIEL GIRARD,
`
` Counterclaim Plaintiffs,
`
` -against-
`
`PANTHERS CAPITAL, LLC, BENJAMIN
`ISAACOV, and the JOHN DOE AND JANE DOE
`INVESTORS,
`
` Counterclaim Defendants
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`Defendants Fruit Street Health, Inc., (“Fruit Street”), and Laurence N. Girard (“Girard”)
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`(collectively, “Defendants”), by and through their attorneys White and Williams LLP, hereby
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`answer the complaint filed in the Supreme Court of the State of New York, County of New York
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`(NYSCEF 1), as follows:
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`1.
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`Defendants lack sufficient knowledge or information to form a belief as to the
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`truth of the allegations contained in paragraph 1.
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`2.
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`Defendants admit that Fruit Street is a company organized under the laws of the
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`State of New York.
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`3.
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`4.
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`Defendants admit that Girard is a resident of New York.
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`Denied as stated. Defendants admit that on or about August 12, 2021, Plaintiffs
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`and Fruit Street entered into an agreement titled “Secured Purchase Agreement” (the
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`“Agreement”). The remaining allegations contained in paragraph 4 constitute legal conclusions
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`to which no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`5.
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`Denied. The allegations contained in paragraph 5 constitute legal conclusions to
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`which no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`6.
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`Denied as stated. The allegations contained in paragraph 6 constitute legal
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`conclusions to which no response is required. To the extent a response is required, Defendants
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`deny those allegations. Moreover, to the extent the allegations attempt to misconstrue the contents
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`of the Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`7.
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`Denied as stated. The allegations contained in paragraph 7 constitute legal
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`conclusions to which no response is required. To the extent a response is required, Defendants
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`deny those allegations. Moreover, to the extent the allegations attempt to misconstrue the contents
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`of the Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`8.
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`Denied as stated. The allegations contained in paragraph 8 constitute legal
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`conclusions to which no response is required. To the extent a response is required, Defendants
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`deny those allegations. Moreover, to the extent the allegations attempt to misconstrue the contents
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`of the Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`AS AND FOR A FIRST CAUSE OF ACTION
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`9.
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`Denied. The allegations contained in paragraph 9 constitute legal conclusions to
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`which no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`10.
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`Denied. The allegations contained in paragraph 10 constitute legal conclusions to
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`which to no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`11.
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`Denied. The allegations contained in paragraph 11 constitute legal conclusions to
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`which to no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`12.
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`Denied. The allegations contained in paragraph 12 constitute legal conclusions to
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`which to no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`AS TO THE SECOND CAUSE OF ACTION
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`13.
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`Denied. The allegations contained in paragraph 13 constitute legal conclusions to
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`which no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`14.
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`Denied. The allegations contained in paragraph 14 constitute legal conclusions to
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`which no response is required. To the extent a response is required, Defendants deny those
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`allegations. Moreover, to the extent the allegations attempt to misconstrue the contents of the
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`Agreement, Defendants refer the Court to the Agreement, which speaks for itself.
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`WHEREFORE, Defendants Fruit Street Health Inc., (“Fruit Street”) and Laurence N.
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`Girard (“Girard”) demand judgment dismissing Plaintiff’s Summons and Complaint, together with
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`costs, expenses, disbursements, and attorney’s fees incurred in the defense of this action, and such
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`other and further relief as this Court deems just and proper.
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`AFFIRMATIVE DEFENSES
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`Defendants assert the following affirmative defenses and reserve the right to assert others
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`that may emerge as the case proceeds:
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`AS AND FOR A FIRST AFFIRMATIVE DEFENSE
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`Plaintiff’s claims are barred as they arise out of an illegal contract.
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`AS AND FOR A SECOND AFFIRMATIVE DEFENSE
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`Plaintiff’s claims are barred as they arise out of fraudulent activity.
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`AS AND FOR A THIRD AFFIRMATIVE DEFENSE
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`Plaintiff’s claims are barred under the N.Y. Penal Law §190.40.
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`AS AND FOR A FOURTH AFFIRMATIVE DEFENSE
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`
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`The Agreement is unenforceable on the grounds of unconscionability because, among other
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`things and without limitation, Plaintiff knowingly preyed upon a financially distressed
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`company, the Agreement charges a usurious rate of interest, and conceals the true nature of the
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`transaction. Moreover, the purported reconciliation provision contained in the contract is
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`illusory, impossible to comply with and intentionally inserted by Plaintiff to further conceal
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`the true nature of the transaction.
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`COUNTERCLAIM
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`Defendants Fruit Street, Inc., (“Fruit Street”), and Laurence N. Girard (“Girard”)
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`(collectively, “Counterclaim Plaintiff”), by and through their attorneys White and Williams LLP,
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`hereby allege against Panthers Capital, LLC, (“Panthers” or “the MCA Company”), and Ben
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`Isaacov (collectively, Counterclaim Defendants”) the following Counterclaims:
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`NATURE OF THE ACTION
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`1.
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`This is an action alleging fraud and civil conspiracy by a merchant cash advance
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`(“MCA”) company, controlled and manipulated by the Principal and Investors, to carry out a long-
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`running scheme to collect upon unlawful debts and otherwise fraudulently obtain hundreds of
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`thousands of dollars in funds from the Counterclaim Plaintiff in violation of the Racketeer
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`Influenced and Corrupt Organizations Act (“RICO”). Just a few months ago, in the midst of the
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`economic effects of the continuing Covid-19 pandemic, Counterclaim Plaintiff, Fruit Street, and
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`Counterclaim Defendant Panthers entered into an agreement pursuant to which the MCA
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`Company, Panthers, purportedly paid a lump sum to purchase Fruit Street’s future receipts at a
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`discount which Fruit Street agreed to repay through daily payments. While couched as the purchase
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`of future receipts, the terms and conditions of the agreements between the Parties as well as the
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`Counterclaim Defendants’ actions, demonstrate that no sale of receipts ever took place and the
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`purported form of the transaction was merely a sham to evade applicable usury laws. In reality,
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`the transaction was a loan that charged interest rates that exceeded not less than 82% interest
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`rates—far greater than the maximum 25% permitted under the laws of New York. See Ex. A, a
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`true and correct copy of the Agreement.
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`2.
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`The high interest and the lack of correlation between receivables earned and amount
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`demanded in payments by the MCA company translated into burdensome daily payments for Fruit
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`Street. Fruit Street complied with the payments for months—until October, 2021—when it
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`realized that it could no longer sustain that burden of the payments and also maintain necessary
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`operating expenses. In response, Counterclaim Defendants reached out to Counterclaim Plaintiff
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`Laurence Girard via text, using appalling language, including insults aimed specifically to
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`Counterclaim Plaintiff’s heritage and religion, and violent threats. See Ex. B, a true and correct
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`copy of the text messages.
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`THE PARTIES
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`3.
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`At all times material hereto, Fruit Street was a limited liability company duly
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`organized under the laws of New York with its principal place of business in New York.
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`4.
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`The MCA Company, Panthers, is a limited liability company duly organized and
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`existing under the laws of New York with its principal place of business in New York and offices
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`in Connecticut.
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`5.
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`Benjamin Isaacov is a principal and Chief Executive Officer at the MCA Company
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`and an adult resident and citizen of Connecticut.
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`6.
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`A.
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`Upon information and belief, each of the Investors is a citizen of New York.
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`General Background of Counterclaim Plaintiff’’s Business and Financial
`Trouble
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`i.
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`The Loan
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`7.
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`On or about August 13, 2021, Fruit Street executed the following documents:
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`a.
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`a certain agreement entitled “Secured Purchase Agreement” (the
`“Agreement”);
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`b.
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`c.
`d.
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`e.
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`f.
`g.
`h.
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`a certain agreement entitled “Security Agreement and Guaranty” (the
`“Guaranty”);
`a certain document entitled “Appendix A-Fee Structure” (“Fee Structure”);
`a certain document requesting bank account information (“Authorization
`Form”);
`a certain document requesting bank log in information (“Bank Log in
`Form”);
`a certain document entitled “No Stacking Addendum;”
`a certain document authorizing ACH withdrawal; and
`a document entitled “Balance Transfer Form.”
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`8.
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`On the same date, Fruit Street provided the signed Agreement and related
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`documents to the MCA Company. See Ex. A.
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`9.
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`Under the Loan documents, the MCA Company agreed to advance $100,000 (the
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`“Loan”) to Fruit Street purportedly in exchange for the purchase of Fruit Street’s future receipts
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`until such time as the amount of $138,000 (the “Repayment Amount”) was repaid.
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`10.
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`The Repayment Amount was to be repaid through daily ACH withdrawals by the
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`MCA Company from Fruit Street’s bank account in 16 weeks. On its face, this translates into an
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`annual interest rate of 82%, in excess of the 25% rate permitted under New York law.
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`11.
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`In August 2021, Fruit Street received $94,851.00 from the MCA Company by
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`means of a direct transfer of the funds into Fruit Street’s bank account, which amount reflects the
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`Loan amount minus certain purported fees paid to the MCA Company.
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`12.
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`Per the Agreement, Fruit Street was to pay $1,150 per day towards repayment of
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`the Loan until $138,000 was remitted to the MCA Company.
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`13.
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`Fruit Street immediately began complying with the daily payments required under
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`the Agreement.
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`14.
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`By October 2021, Fruit Street could no longer sustain the burden of the fixed daily
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`payments it was required to submit in repayment of the loan, and at the same time maintain
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`necessary operating expenses.
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`15.
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`After October 2021, Laurence Girard was subject to a number of unlawful
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`collection attempts, including via text message. See Ex. B.
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`B. General Predator Background of the MCA Industry
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`16.
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`As Bloomberg News has reported, the MCA industry is “essentially payday lending
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`for businesses,” and “interest rates can exceed 500 percent a year, or 50 to 100 times higher than
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`a bank’s.” 1 The MCA industry is a breeding ground for “brokers convicted of stock scams,
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`insider trading, embezzlement, gambling, and dealing ecstasy.” As one of these brokers admitted,
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`the “industry is absolutely crazy. … There’s lots of people who’ve been banned from brokerage.
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`There’s no license you need to file for. It’s pretty much unregulated.” 2
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`17.
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`The National Consumer Law Center also recognized that these lending practices
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`are predatory because they are underwritten based on the ability to collect, rather than the ability
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`of the borrower to repay without going out of business. This is because MCA companies “receive
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`the bulk of their revenues from the origination process rather than from performance of the loan
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`[and thus] may have weaker incentives to properly ensure long-term affordability, just as pre-2008
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`mortgage lenders did.” (“[A] fundamental characteristic of predatory lending is the aggressive
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`marketing of credit to prospective borrowers who simply cannot afford the credit on the terms
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`being offered. Typically, such credit is underwritten predominantly on the basis of liquidation
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`value of the collateral, without regard to the borrower’s ability to service and repay the loan
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`according to its terms absent resorting to that collateral.”).
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`18. MCA companies only care about whether they can collect upon default, and not
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`whether the small business can survive.
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`1 Zeke Faux and Dune Lawrence, Is OnDeck Capital the Next Generation of Lender or Boiler Room?, BLOOMBERG
`(Nov. 13, 2014, 6:07 AM), https://www.bloomberg.com/news/articles/2014-11-13/ondeck-ipo-shady-brokers-add-
`risk-in-high-interest-loans.
`2 Id.
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`8
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`C. The Loan to Fruit Street Is Consistent with the MCA Industry’s Predatory
`Practices
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`19.
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`Like many MCA companies the Enterprise at issue (as defined below) preys upon
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`cash-strapped businesses that cannot readily obtain financing from banks and other traditional
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`lenders. Although their agreements are titled “Secured Revenue Purchase Agreements” and
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`purport to represent the sale/purchase of a businesses’ future revenue, the Enterprise markets,
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`underwrites and collects upon its transactions as loans, with interest rates far above those
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`permissible under New York law.
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`20. When underwriting new transactions, the Enterprise does not evaluate the
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`merchant’s receivables, which are the assets purportedly purchased; rather the Enterprise focuses
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`on other factors such as the merchant’s credit ratings and bank balances, if they perform any due
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`diligence at all.
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`21. Moreover, the MCA Company did not even advance to Fruit Street the full amount
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`of the Loan, instead, the amount was purportedly reduced by the MCA Company for certain fees
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`under the Loan Documents. The Loan Documents states that certain fees—some identified, some
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`to be determined—charged or that could be charged later on by the MCA Company, including:
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`Fee
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`Amount
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`Origination Fee
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`$295
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`Underwriting Fees
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`$499 or 12% of the proposed funding amount
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`NSF Fee (Standard)
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`$50 (each)
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`Bank Charge Fee
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`“$50 when Merchant requires a chance of Bank Account
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`to be Debited, requiring us to adjust our system”
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`CRM Login Fee
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`$99 per month
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`Wire Fee
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`“Each Merchant shall receive their funding electronically
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`to their designated bank account and will be charged $50
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`for Fed Wire or $0 for a bank ACH”
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`Stacking
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`“10% of Outstanding RTR shall be assessed, in addition
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`to any other damages as a liquidated fee, not as a
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`UCC Fee
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`penalty…”
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`$195
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`Miscellaneous
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`Service
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`“Merchant agrees that it shall pay for certain services
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`Fees
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`related to the origination and maintenance of the
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`accounts…”
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`22.
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`A large portion of the fees purportedly related to the costs of due diligence and
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`underwriting, however, the MCA Company performed little or no due diligence or underwriting.
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`In reality, these fees were merely additional disguised interest.
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`D.
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`The Loan and the Loan Documents are Substantively and Procedurally
`Unconscionable.
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`23.
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`The Loan Documents are unconscionable contracts of adhesion that are not
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`negotiated at arms-length.
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`24.
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`Instead, they contain one-sided terms that prey upon the desperation of the small
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`business and its individual owner and help conceal the fact that the transactions, including those
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`involving Counterclaim Plaintiffs, are really loans.
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`25.
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`Among these one-sided terms, the Loan Documents include: (1) a provision giving
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`the MCA Company the irrevocable right to withdraw money directly from Counterclaim Plaintiff’s
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`bank accounts, including collecting checks and signing invoices in the Counterclaim Plaintiff’s
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`name, (2) a provision preventing Counterclaim Plaintiff from transferring, moving or selling the
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`business or any assets without permission from the MCA Company, (3) a one-sided attorneys’ fees
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`provision obligating the Counterclaim Plaintiff to pay the MCA company’s attorneys’ fees but not
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`the other way around, (4) a venue and choice-of-law provision requiring Counterclaim Plaintiff to
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`litigate in a foreign jurisdiction under the laws of a foreign jurisdiction, (5) a personal guarantee,
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`the revocation of which is an event of default, (6) a jury trial waiver, (7) a class action waiver, (8)
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`a collateral and security agreement providing a UCC lien over all of the business’ assets, (9) a
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`prohibition against Counterclaim Plaintiff obtaining financing from other sources, (10) the right to
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`contact Merchant’s banks and financial institutions using Counterclaim Plaintiff’s personal
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`information to verify the existence of an account and obtain account balances, and (12) a power-
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`of-attorney empowering the MCA Company “to file or take any action or institute any proceeding
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`which [the MCA Company] may deem necessary for the collection of any unpaid Purchased
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`Amount from the Collateral, or otherwise to enforce its rights with respect to payment of the
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`Purchase Amount.”
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`26.
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`The Loan Documents are also unconscionable because they contain numerous
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`knowingly false statements. Among these knowingly false statements are that: (1) the transaction
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`is not a loan, (2) the daily payment is a good-faith estimate of Counterclaim Plaintiff’s receivables,
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`and (3) the fixed daily payment is for Counterclaim Plaintiff’s convenience.
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`27.
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`The Loan Documents are also unconscionable because they are designed to fail.
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`Among other things, the Loan Documents are designed to result in default in the event that the
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`Counterclaim Plaintiff’s business suffers any downturn in sales by: (1) lacking a mandatory
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`reconciliation provision to ensure the amount remitted to the MCA Company reflect the
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`Counterclaim Plaintiff’s actual receipts, (2) preventing the Counterclaim Plaintiff from obtaining
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`other financing, (3) and requiring the Counterclaim Plaintiff to continuously represent and warrant
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`that there has been no material adverse changes, financial or otherwise, in such condition,
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`operation, or ownership of Counterclaim Plaintiff.
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`28.
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`The above-mentioned unconscionable practices also violate the strong public
`
`policies of New York.
`
`E. The Enterprise Uses a Sham Reconciliation Provision to Disguise the Loans.
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`29.
`
`To evade state usury laws, the Enterprise includes a sham reconciliation provision
`
`in the Loan Documents to give the appearance that the loans do not have a definite term.
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`30.
`
`Under a legitimate reconciliation provision, if a merchant pays more through its
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`fixed daily payments than it actually received in receivables, the merchant is entitled to seek the
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`repayment of any excess money paid. Thus, if sales decrease, so do the payments.
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`31.
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`For example, if an MCA company purchased 25% of the merchant’s receivables,
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`and the merchant generated $100,000 in receivables for the month, the most that the MCA
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`company is entitled to keep is $25,000. Thus, if the merchant paid $40,000 through its daily
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`payments, then the merchant is entitled to $15,000 back under the reconciliation provision.
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`32.
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`In order to ensure that Counterclaim Plaintiff can never use the reconciliation
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`provisions in the Loan Documents, however, the Enterprise falsely represents that the fixed daily
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`payment amount is a good-faith estimate of the percentage of receivables purchased. By doing so,
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`the Enterprise ensures that if sales decrease, the required fixed daily payments remain the same.
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`33.
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`In fact, the MCA Company had the ability to reconcile the accounts each month
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`based on its access to Counterclaim Plaintiff’s bank accounts and records, but the MCA Company
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`never reconciled the account.
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`34.
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`On information and belief, the Enterprise does not have a reconciliation department,
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`does not perform reconciliations, and has never refunded a merchant money as required under their
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`sham reconciliation provision.
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`F.
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`35.
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`The Enterprise Intentionally Disguised the True Nature of the Transactions.
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`Despite the fact the true nature of the transaction between the MCA Company and
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`Counterclaim Plaintiff is a loan, the Loan Documents disclaim that Counterclaim Plaintiff was
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`borrowing money from the MCA Company.
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`36.
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`The Enterprise’s attempt to disclaim the Parties’ transactions as a loan is
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`contradicted by the Enterprise’s marketing efforts and communications to merchants, which
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`describe the transactions as paying back loans, describe themselves as lending funds to merchants,
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`and consistently describe merchants as borrowing and paying back funds.
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`37. Moreover, the transactions are, in economic reality, loans that are absolutely
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`repayable. Among other hallmarks of a loan:
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`a. The daily payments required by the Loan Documents were fixed and the so-
`called reconciliation provision was mere subterfuge to avoid state usury
`laws. Rather, just like any other loan, the purchased amount was to be
`repaid within a specified time;
`b. The default and remedy provisions purported to hold the Counterclaim
`Plaintiff absolutely liable for repayment of the purchased amount;
`c. While the Loan Documents purported to “assign” all of the merchant’s
`future account receivables to the Enterprise until the purchased amount was
`paid, the merchants retained all the indicia and benefits of ownership of the
`account receivables including the right to collect, possess and use the
`proceeds thereof. Indeed, rather than purchasing receivables, the Enterprise
`merely acquired a security interest in the merchant’s accounts to secure
`payment of the purchased amount;
`d. Unlike true receivable purchase transactions, the Loan Documents were
`underwritten based upon an assessment of the merchant’s creditworthiness;
`e. The purchased amount was not calculated based upon the fair market value
`of the merchant’s future receivables, but rather was unilaterally dictated by
`the Enterprise based upon the interest rate it wanted paid. Indeed, as part of
`the underwriting process, the Enterprise did not request any information
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`concerning the merchant’s account debtors upon which to make a fair
`market determination of their value;
`f. The amount of the daily payments was based upon when the Enterprise
`wanted to be paid, and not based upon any good-faith estimate of the
`merchant’s future account receivables;
`g. The Enterprise assumed no risk of loss due to the merchant’s failure to
`generate sufficient receivables because the failure to maintain sufficient
`funds in Counterclaim Plaintiff’s account constituted a default under the
`agreements;
`h. The Enterprise required Counterclaim Plaintiff to undertake certain
`affirmative obligations and make certain representations and warranties that
`were aimed at ensuring the company would continue to operate and generate
`receivables and a breach of such obligations, representations and warranties
`constituted a default, which fully protected the Enterprise from any risk of
`loss resulting from the Counterclaim Plaintiff’s failure to generate and
`collect receivables.
`i. The Enterprise required that the Counterclaim Plaintiff provide personal
`guarantee of the performance of the representations, warranties and
`covenants, which the Enterprise knew were doomed to fail.
`
`38.
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`The Enterprise also shows in its underwriting practices that their agreements are
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`loans. Typically, banks and other institutions that purchase account receivables perform extensive
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`due diligence into the creditworthiness of the account debtors whose receivables they are
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`purchasing. The Enterprise did not perform such a review with regards to the transactions with
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`Counterclaim Plaintiff.
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`39.
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`The Enterprise made its decision to extend the Loan to Counterclaim Plaintiff based
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`on Counterclaim Plaintiff’s available assets and ability to repay the Loan, including personal
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`property available to Counterclaim Plaintiff.
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`40.
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`Prior to executing the Loan Documents, the Enterprise knew or should have known
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`the amount of the receipts received by Counterclaim Plaintiff during that period (e.g. other loans,
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`MCAs). Nonetheless, the amount of the daily payments exceeded the purported percentage of
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`receivables purchased by the Enterprise.
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`41. When the Enterprise goes to collect upon its agreements, it treats them just like
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`loans. For example, it requires the merchant to make fixed daily payments and grant security
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`interests to the Enterprise in substantially all the merchant’s assets to ensure that the daily
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`payments are made.
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`FIRST CAUSE OF ACTION
` (RICO: 18 U.S.C. § 1962)
`
`42.
`
`Counterclaim Plaintiff repeats and reasserts the allegations contained in all of the
`
`preceding paragraphs as if the same were set forth herein at length.
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`A. The Unlawful Activity.
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`43. More than a dozen states, including New York, place limits on the amount of
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`interest that can be charged in connection with providing a loan.
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`44.
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`In 1965, the Legislature of New York commissioned an investigation into the illegal
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`practice of loansharking, which, prior to 1965, was not illegal with respect to businesses.
`
`45.
`
`As recognized by the New York Court of Appeals in Hammelburger v. Foursome
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`Inn Corp., 54 N.Y.2d 580, 589 (1981), the Report by the New York State Commission on
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`Investigation entitled “An Investigation of the Loan-Shark Racket” brought to the attention of the
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`Governor and the public the need for change in both, as well as for change in the immunity statute,
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`and for provisions making criminal the possession of loan-shark records and increasing the grade
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`of assault with respect to the “roughing up tactics” used by usurious lenders to enforce payment.
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`B. Culpable Persons.
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`46.
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` The Principal and the Investors are “persons” within the meaning of 18 U.S.C. §
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`1961(3) and 18 U.S.C. § 1962(c) in that each is either an individual, corporation or limited liability
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`company capable of holding a legal interest in property.
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`47.
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`At all relevant times, the Principal and each of the Investors were, and are, a person
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`that exists separate and distinct from the Enterprise.
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`48.
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`The Principal has an ownership interest in the MCA Company and is the
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`mastermind of the Enterprise.
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`49.
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`The Investors are individuals and business entities that provide funding for the
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`loans.
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`50.
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`Through their operation of the MCA Company, the Enterprise solicits, underwrites,
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`funds, services, and collects upon lawful debt incurred by small businesses in states that do not
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`have usury laws.
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`C. The Enterprise.
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`51.
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`The Principal, the MCA Company, and the Investors constitute an Enterprise within
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`the meaning of 18 U.S.C. §§ 1961(4) and 1962(c).
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`52.
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`The Principal, the MCA Company, and the Investors are associated in fact and
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`through relations of ownerships for the common purpose of conducting an ongoing and unlawful
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`enterprise. Specifically, the Enterprise has a common goal of soliciting, funding, servicing, and
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`collecting upon usurious loans that charge interest at more than twice the enforceable rate under
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`the laws of New York, and other states.
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`53.
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`Since at least 2017 and continuing through the present, th