MJ Capital Had Thousands More Investors Than Previously Believed
March 28, 2022
An amended complaint filed last week by the SEC against MJ Capital Funding, LLC et al. revealed a shocking new assessment, that the alleged ponzi scheme attracted more than four times the amount of investors originally believed. With more than 9,000 investors now accounted for, the number has continued to shoot up since the case was first filed last August.
Between them all, MJ Capital collected $194.1M in investor funds, the amended complaint states. $56M of it was allegedly misused through payments made to various entities, “a substantial portion of which represent payments to sales agents for promoting the investments in the MJ Companies.” Another $64M was paid back to investors as purported returns from the company’s business operations.
Those operations were minuscule, the SEC claims. MJ Capital is alleged to have only allocated $872,000 towards the line of work it claimed to be operating in.
Possessing the hallmarks of a classic ponzi scheme, the SEC further said that “the only way the MJ Companies could honor their obligations to investors would be by successful continuation of their fraudulent scheme. Once the supply of new investors was exhausted, the MJ Companies would be unable to pay the promised returns to existing investors.”
Square Loans Originated $850M in SMB Funding in Q4
February 24, 2022Despite Block feasting off of Bitcoin sales revenue last year, the company’s small business lending division, Square Loans, originated $850M in loans in the 4th quarter of 2021. That was spread out across 103,000 loans.
That brings the full year 2021 total to $2.45B, a new annual record for Square Loans, whose non-PPP related lending had dropped by more than 50% in 2020 when compared to 2019. It also put them ahead of rival OnDeck for the first year ever.
Square Loans was not mentioned by name during the company’s Q4 earnings call, but Square CFO Amrita Ahuja said, “We continue to believe our Square ecosystem is differentiated due to our integrated and cohesive set of products across the hardware, software, payments and financial services, serving seller needs in a more comprehensive way. We are making progress in surfacing incremental product adoption to serve our sellers across multiple vectors, with a goal of creating a more retentive and valuable relationship.”
Q & A with Ryan McCurry of ACHWorks About the Future of Small Business Lending
February 22, 2022
In a recent chat, AltFinanceDaily talked with Ryan McCurry, President of ACHWorks. McCurry discussed the future of his company, payments, small business financing, and the impact of digital assets on the industry.
Q (Adam Zaki): Your company recently announced an acquisiton. How does this move help take ACHWorks to where the company wants to go?
A (Ryan McCurry): We are excited to share that ACHWorks was acquired by VeriCheck Inc. on December 31, 2021. VeriCheck Inc. (VCI) is a wholly owned subsidiary of Commercial Bank of California (CBC), who has been one of ACHWorks’ sponsor banks for nearly 20 years.
The acquisition brings more resources, both in terms of staffing and capital to ACHWorks’ business efforts. Conversely, ACHWorks’ sales approach, market specializations and diverse technical capabilities will support VCI’s growth goals. By combining the teams and technology, we believe we will compound our benefits to reach an even higher level of success together.
The great news with this acquisition is that where ACHWorks was weak, VCI is strong. Likewise, ACHWorks has some unique technology and expertise that VCI hadn’t leveraged before and can now capitalize upon.
Furthermore, VCI relies heavily on partnerships with ISO’s and third party gateways for processing ACH payments with a high number of merchants across all sectors, whereas ACHWorks tends to specialize in a few verticals while maintaining direct sales and direct relationships with all merchants – even when the merchant is utilizing an integrated software partner.
Q: Are ACH payments here to stay? With so many ideas floating around in this space, what is the future of ACH?
A: The future of the ACH as a payment system is strong and growing quickly. In 2021, the ACH network grew by 29.1 billion payments valued at $72.6 trillion dollars. Same Day ACH grew by 74% over 2020 and total volume was up almost 9%, continuing a 7-year growth trend. Business-to-business ACH payments grew at a rate above 20% and 33% over the last two years, respectively.
We believe the ACH payments space is going to continue to grow and become a more widely used payment rail, and our acquisition is evidence of that growth.
Q: What is the biggest issue your company is currently overcoming?
A: There are always challenges facing the payments industry. Naturally, as a fintech industry, payments companies regularly face emerging technology, regulatory or legislative activity, and ongoing cybercrime.
Currently, our focus is blending the VCI and ACHWorks teams and evolution of our joint technology. We are pleased to share that VCI hired the entire ACHWorks operational team, and is retaining all of our existing technology and benefits to our clients. Bringing the two platforms and teams together will have exponential benefits for clients and partners moving forward.
Q: The small business financing industry is becoming less reliant on the traditional sales models. How will ACHWorks combat this? Will you help the funders/brokers innovate to help secure the current infrastructure or seek new tech clients that are stepping into the space?
A: There’s the old saying that change is the one constant. Initially, business finance companies only wanted ACH for reoccurring daily debits, and as merchant demographics changed weekly or custom payment frequencies have become more prevalent. However, now about half of our business finance clients use ACHWorks’ technology not just for debiting merchant receivables, but also for sending ACH Credits to merchants for funding a deal, automating syndication payments for participation rates or paying commissions to brokers.
Likewise, ACHWorks offered Same Day ACH capability to our clients on the first day it become available on the ACH Network. The use of Same Day ACH has been slowly increasing as funders utilize it both to fund merchants or to act on a merchants request to charge them today (most common on distressed accounts).
As the funder / broker relationship continues to evolve, ACHWorks will be there to help facilitate the movement of the funds. We hope to leverage our unique status of being owned by a bank to bring new technologies to the business finance industry and other spaces that are under-supported by traditional payment processors. We are excited for these new capabilities to come and will keep the AltFinanceDaily community updated as we have more to share.
Q: There seems to be a lot of payments companies across fintech. The elephant in the room at Money 20/20 in October was the ‘payments bubble’ taking place. What is your take on this? Is fintech looking too much into payment processing innovation?
A: Automobiles have been around for about 140 years, and yet innovation continues to happen. They have seen the switch from steam to electric, to internal combustion and back to electric. Computer technology has only been common in business usage since the 50’s and the internet has only been heavily used since the late 90’s. When I started in this business, we used to mail our software to clients on a series of 14 floppy disks. I would argue that the innovation and evolution of payments and fintech is only in its infancy.
As technology continues to permeate all walks of life, we expect to see payments leveraged to make commerce more organic with far less friction. Most payment processors I speak with feel that we are the original “fintech” and that the newly emerging “fintech” market is just utilizing the infrastructure we put in place.
Q: Are cryptocurrencies a topic of conversation in your office? Blockchain tech offers major benefits in the payments world. Do you or your company have any thoughts on how this could be leveraged?
A: You can’t escape crypto, it invades all conversations these days. However, our focus is on working with fiat currency and regulated payment channels because we process ACH payments through the Federal Reserve utilizing State or Nationally chartered banks. Don Singer, the CEO of VCI and I were discussing this topic previously, and he told me crypto is the new shiny sports car, or personal aircraft, but we work on the rail road. ACH is not as sexy as crypto, but it moves nearly all of the money in the U.S. Those debit card, credit card, Venmo, Zelle and real time payments systems are just the messaging systems, the money is being moved later that day, and it’s being moved via ACH.
Shopify Capital Originated $324M in Funding in Q4
February 16, 2022
Shopify Capital originated $324M in Q4 2021, bringing the full-year total to $1.39B. That figure represents a massive increase over the company’s previous originations record of $794M in 2020.
During the quarterly earnings call, Shopify CFO Amy Shapero listed Shopify Capital among the divisions that drove revenue growth for the company in 2021.
“As merchants build momentum, inventory and marketing needs to grow alongside it,” said Shopify CEO Harley Finkelstein. “And this is where Shopify Capital comes in, offering merchants the funding they need to expand their business.”
Total originations came in just shy of the numbers that rival OnDeck reported a week earlier. OnDeck originated $1.76B in funding to small businesses in 2021.
NJEDA Approves Grants to Support Micro Business Lenders
February 16, 2022
Last week, the New Jersey Economic Development Authority (NJEDA) endorsed the construction of the Main Street Lenders Grant.
Eligible micro business lenders will be offered up to $1 million that can be used to create new lending products or as supplemental funding for existing products. The Main Street Lenders Grant is the third product the NJEDA plans to launch under the Main Street Recovery Program. The $100 million small business support program was created under the Economic Recovery Act of 2020 (ERA) and was signed by Gov. Phil Murphy in January of 2020.
The technical assistance grant will support those who qualify with the costs associated with providing technical assistance to micro businesses, aiding these businesses to qualify for loans. The maximum grant one can receive is 50 percent of their lending grant amount (not to exceed $500,000).
The second product under the Main Street Recovery Program is the Small Business Improvement Grant, with applications now open as of Thursday. This product will reimburse eligible small businesses and nonprofits for up to 50 percent of eligible project costs associated with building improvements or purchases.
“Small businesses are the backbone of New Jersey,” stated Governor Phil Murphy. “This program will allow small businesses and nonprofits throughout our state to make the investments necessary for their success and for improvements to their spaces.”
Members of Congress Petition Biden For More Small Business COVID Relief
February 11, 2022
Members of Congress are urging Biden to pass a targeted small business relief package for industries that were hit the hardest by the Omicron Surge. Programs such as the Restaurant Revitalization Fund and Shuttered Venue Operators Grants program are being pushed to reopen. Businesses that did not receive initial funding and those that need a second round of funding would both be eligible.
It is further being asked that at-risk sectors centered on in-person gatherings be made eligible for federal assistance. This includes travel and fitness industries and businesses that offer indoor recreation and group activities.
The petitioners are concerned with two things: (1) that a surge in business closures may aggravate the high prices that communities are already facing and (2) That reduced in-person gatherings may have led to a large number of business closures and that a post-Omicron demand for them in the spring in company with significant new supply constraints is an issue that could arise.
The last request made was that the American Rescue Plan’s tax credits available to small businesses to cover earned sick leave benefits for employees affected by COVID-19 be extended.
Two other popular relief programs, PPP and EIDL, have already wound down. The EIDL program just came to a close at the end of January.
Enova and Nav Partner Up, Leveraging Data for Instant Funding
February 9, 2022
Intelligent financing platform Nav has announced an expanded partnership with small business lender Enova, bringing a mass amount of data to the X’s and O’s of small business financing approvals and funding processes of companies like OnDeck and Headway Capital, subsidiaries of Enova.
According to a joint press release, the move will create the first two-sided open marketplace in small business lending.
“Two-sided means we are bringing together both the demand and the supply,” said Greg Ott, CEO of Nav. [Nav] is the platform in the middle which allows small businesses to compare their options using the real data that the supplier, say lenders like Enova, use so that the small business owner can understand what they qualify for before they apply.”
As the head of a company that uses the value of data as a business model, Ott spoke about the harvesting of such data in ways that’s mutually benefits all parties.
“It’s all permissible, part of the desire for a lot of companies to get more data is you have to have a value proposition for small business owners to share their data,” said Ott. “Because Nav allows you to compare your options, we connect three commercial bureaus, we connect two personal bureaus, and then we connect the bank accounts so we can see the cash flow data. In certain cases, we may connect with merchant processing data, accounting data, and other data sets that the small business owners connect into our platform.”
While data will provide the merchant with options on different types of financing, the lenders also have a benefit in leveraging data provided by merchants to Nav from a marketing perspective. By having merchants input their own information, Enova and its subsidiaries like OnDeck and Headway Capital can offer those potential borrowers ‘instant funding’.
“I think [instant funding] is something that Enova has tried to do for a long time,” said Jim Granat, Head of Enova SMB. We’re trying to make things where the access to capital is as effortless as possible for the hard working Americans or business owners. We try really hard to take that approach in the way we design our product because in today’s world of ‘always online’ expectations for business owners, we want to provide the type of experience that allows them to have certainty, if it’s at all possible, as fast as they can.”
Granat stressed that effortless access to capital for merchants is the best way to differentiate one funder from another when trying to lend a small business money.
“An effortless experience allows [merchants] to know what they can do for their business as well [lenders] being able to capture the different business owners’ attention at the moment that they need it.”
PPP Fraud Case Reports Collusion Between Loan Broker and IRS Supervisor
February 2, 2022
In a PPP scheme that saw twenty-two people get brought up on charges like conspiracy and wire fraud, a federal indictment also alleges collusion between a Supervisory Individual Tax Advisory Specialist with the IRS named Melissa Myrick, and an Atlanta business loan broker named Mark Mason, who was president of Atlanta Business Capital.
According to the DOJ, Mason and Myrick worked together to falsify PPP applications by leaving sections like average monthly payroll and number of employees blank. Between May 12 and May 26 of 2020, Myrick signed off on over $280,000 in altered loan applications while also being an active employee with the IRS.
The indictment also says that merchants who received the funding were in on the scam. “Purported business owners communicated with Mason about the fraudulent PPP loan applications, as well as the amounts to include on the Forms 941 and purported payroll spreadsheets submitted with the applications.”
Mason pleaded guilty on January 4 to one count of wire fraud and one count of money laundering in connection with his involvement with the PPP fraud mentioned in the indictment.
The report claims that on top of altering documents to get the government-backed funds, Mason charged ‘success fees’ to the merchants he was working with. While pleading guilty, Mason admitted to funneling fraudulent deals totaling between $3.5M and $9.5M
Mason seemed to attract clients with notoriety onto his scam. Public figures mentioned in the indictment include actress Ion Overman who appeared in Desperate Housewives, music producer Carlos “Clos” Stephens who has worked with hip-hop guru Master P, and actor Dale Godboldo who appeared in The People v. O.J. Simpson.
