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Yellowstone Settles With New York AG For $1 Billion
December 4, 2024
By Stuart J. Wells, Esq.
On December 2, 2024, New York Attorney General (AG) Letitia James asked a state court to approve a settlement between the AG, Yellowstone Capital LLC (Yellowstone) and twenty-four related entities regarding a petition filed by the AG in March 2024. If approved by the court, the settlement would resolve claims that Yellowstone, acting through a myriad of corporate names, had engaged in a predatory lending scheme by disguising illegal, usurious loans to small businesses as the purported purchase of receivables or so-called “Merchant Cash Advances.” Under the proposed settlement, the Yellowstone entities would: (i) consent to the entry of a judgment against them in the amount of $1,065,000,000; (ii) make an immediate payment to the AG in the amount of $3,400,000; (iii) vacate unsatisfied judgments totaling $534,552,724; and (iv) be permanently enjoined from engaging in any merchant cash advance business.
The AG also sought approval of a separate settlement with Isaac Stern, Yellowstone’s Chief Executive Officer, and Jeffrey Reece, Yellowstone’s President. Under the proposed settlement, Stern and Reece would: (i) immediately pay $12,700,000 to the AG and (ii) be permanently enjoined from engaging in any merchant cash advance business.
The settlements do not completely resolve the AG’s petition. The AG continues to pursue claims against Delta Bridge Funding LLC, Cloudfund LLC and other individuals allegedly involved in the predatory lending scheme. The non-settling respondents have moved to dismiss the AG’s claims against them on various grounds and those motions to dismiss remain pending. As part of their agreements with the AG, the settling Yellowstone entities and officers have agreed to cooperate with the AG in connection with the ongoing proceedings against the non-settling respondents.
Coming at the heels of a $77,000,000 judgment obtained by the AG against a different merchant cash advance company, Richmond Capital Group, the settlements represent another successful effort by the AG to protect small businesses and to regulate the merchant cash advance industry. Armed with these successes, the AG will likely to continue its enforcement activities.