The US Securities and Exchange Commission has filed fraud charges against 1 Global Capital LLC, a Florida-based cash advance company, and its ex-CEO Carl Ruderman. According to the regulator, they allegedly defrauded at least 3,400 investors and since 2014 have fraudulently raised over $287M through unregistered securities sales.
According to the SEC’s complaint, 1 Global worked with a network of both registered and unregistered investment advisors, brokers who were barred from the industry, and other sales agents. The company paid them millions of dollars in commissions for offering and selling the unregistered securities to investors in at least 25 US states.
Investors were promised that they would make money from loans that 1 Global would issue to companies. The investments were touted as “high-return, low-risk” and purportedly involved the issuing of short-term cash advances to businesses that didn’t qualify for financing of the “more traditional” varieties.
The advances were called Merchant Cash Advances (MCAs) and were supposedly “secured” loans. A strict and through underwriting process supposedly took place, and according to 1 GLOBAL, only one in ten loan applications were approved.
Investors Were Lured by Bogus Account Statements
Investors were reportedly drawn to invest with 1 Global because of the “promised’ high returns. For example, says the complaint, one investor used nearly $1M from a 401k retirement plan. Another investor, after being shown bogus clients statement with double digit yearly returns, at first invested $135K and then another $150K after seeing supposed profits listed in his own statements. Another investor, because of “profits” on her monthly statements, invested about 20% of her net worth.
The SEC contends that contrary to what investors told, merchants were promised money through a process that was supposedly hassle-free and without the “hoops” set up by most financial institutions. Credit scores, in most cases, were reportedly not a factor when it came to approving loans for 90% of merchant applicants. Even though 1 Global claimed that the average loan it issued to businesses was about $68K, in many cases it actually issued loans in the hundreds of thousands and millions of dollars. It even issued a $40M loan to one California car dealership.
Ruderman Allegedly Misappropriated Investor Funds
A significant amount of investors’ funds allegedly went towards supporting Ruderman’s “lavish lifestyle,” as well as to Ganador Enterprises and Bright Smile Financing, which were consumer loan companies that he owned. The two companies were unrelated to 1 Global’s business.
Ruderman and 1 Global allegedly misappropriated at least $35M, with some of the money also going toward unrelated businesses owned by relatives and acquaintances of Ruderman.
A few months ago, 1 Global announced that it had filed for bankruptcy protection. Ruderman has stepped down from the company.
Now, the SEC is seeking disgorgement of allegedly ill-gotten gains, prejudgment interest, and financial penalties. In August, a district court judge granted the regulator’s request for a temporary asset freeze against Ruderman and his companies, which are relief defendants in this civil lawsuit. The Commission is charging Ruderman and 1 Global with violating multiple provisions of the federal securities laws.
If you are an investor that has sustained losses from investing with 1 Global, our investor lawyers would like to offer you a free case evaluation. Contact Shepherd Smith Edwards and Kantas, LTD LLP today.
Read the SEC Complaint (PDF)
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