New York Businesses Say Cash Advance Firms Sent Threats and Looted Bank Accounts

THE CITY

by George Joseph and Ben Brachfeld, The Brooklyn Paper September 21, 2022

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This piece was reported and published in a partnership between THE CITY and the Brooklyn Paper.

At the beginning of 2020, Laurence Girard had big ambitions for his Manhattan-based company, Fruit Street Health. 

“Our goal is to really prevent hundreds of thousands, or even millions of cases of Type II diabetes,” Girard, just 27 at the time, told an interviewer at a startup festival in San Francisco that January.

The company’s diabetes-prevention software model was fairly simple: connecting patients with dieticians on video, enabling them to share photos of their meals, and tracking their weight-loss progress with wireless scales and Fitbits.

But a few weeks later, COVID-19 began its blitz across the United States, paralyzing the nation’s economy and evaporating the cash reserves of many companies, including Girard’s. 

So in 2021, in order to keep operating the young entrepreneur began securing financing from several “merchant cash advance” companies.

For Girard, that sounded better than a traditional loan. Instead of having to make fixed payments on a set schedule, he could pay back the advance and then some by furnishing the financier with a cut of his future revenue as it trickled in.

To secure that up-front money, the merchant cash advance companies would gain access to Fruit Street’s bank accounts and withdraw daily sums. But if those were larger than his actual revenues, the contracts stipulated he could ask for a refund and get the daily payments lowered, a process known as “reconciliation.”

One of the cash advance companies Girard signed up with was BMF Advance LLC, a company headquartered in Midwood, Brooklyn. He received several cash infusions, adding up to just over a million dollars, between August and September of 2021, according to a lawsuit he would file a year later.

But in the weeks that followed the funding, Girard’s suit alleges, BMF Advance took  thousands of dollars out of Fruit Street Health’s bank account every day without any assessment of the “ebbs and flows” of his revenues.

In November when Girard texted Gavriel Yitzchakov, one of BMF Advance’s higher-ups, asking for the payments to be lowered because they didn’t line up with his assessment of his revenues, Yitzchakov seemed to treat the request as if it were a negotiation, rather than a contractually-mandated calculation based on his bank statements, according to messages cited in the suit.

That December, as Fruit Street Health continued to argue with BMF over how much it was withdrawing from the business’ accounts each day, Girard began receiving disturbing messages from Gavriel’s brother, Binyamin Yitzchakov, himself an employee of another cash advance firm that had also financed Fruit Street Health around the same time, according to texts cited in the suit and provided to THE CITY and Brooklyn Paper by Girard. 

“I guess You don’t want me to help you // And you want a Enemy,” Binyamin Yitzchakov allegedly told Girard on Dec. 7, after the business owner didn’t reply to a previous text. 

As Girard stayed silent, Yitzchakov’s purported text messages kept escalating, including vulgar, anti-Semitic attacks — coming from a fellow Jew. 

“You ashkenaz// Peace of shit.// I understand why the nazis fked you ashkenaz white Boys. // You’re a thief // And you won’t get away with it,” Yitzchakov allegedly wrote on December 14th, suggesting that Hitler did not “finish the job” in the Holocaust and that Ashkenazi Jews were murdered en masse “because of thief’s like you.”

After receiving the messages, Girard, who is an Ashkenazi Jew, said he remembers being nervous about just going for a cup of coffee outside his home.

“It’s one thing if you want to sue us, right? Anybody can go to court, right?” he told THE CITY and Brooklyn Paper in an interview. “But obviously, you’re crossing a different line when you’re basically making death threats to the company you’re lending money to.”

Toward the end of that December, BMF Advance pulled out its trump card in court: a “confession of judgment,” a controversial legal agreement that has borrowers waive their right to a legal defense over any future payment disputes and has often enabled merchant cash advance companies to unilaterally empty out businesses’ bank accounts. Girard had signed one three months earlier.

On January 5th, a Manhattan court clerk certified the judgment which held that  Fruit Street Health had to pay more than $800,000, an amount Girard has not yet forked over since he does not have that amount in a New York state bank account, according to his lawyer. 

Since then, the startup founder has been seeking to vacate the judgment with his own lawsuit against BMF Advance LLC. 

A Bum Steer for New Yorkers?

Girard’s case is one of hundreds churning through New York’s courts thanks to a state law that puts businesses here on an unequal footing with those of others across the country. 

In 2019, Albany lawmakers banned the use of confessions of judgments in New York courts for out-of-state businesses after a Bloomberg series exposed how they enabled merchant cash advance companies to obtain judgments against borrowers thousands of miles away of failing to make their payments with little to no evidence. But the reform did not stop companies from filing confessions against New York-based businesses like Girard’s. 

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