Payday lenders are already some of the worst people on Planet Earth. They lend money to the poor and desperate at loan-shark-level interest rates and essentially trap people in debt for ungodly long periods of time. The industry also donates heavily to Donald Trump's campaigns.
One particular payday lender now seems like even more of an asshole than the others. Yesterday the Securities and Exchange Commission (SEC) charged Alan G. Heide, age 61, with one count of conspiracy to commit securities fraud after the SEC says it caught him lying to investors in order to raise money from tons of people. Heide runs the Hallandale Beach payday-lending business 1 Global Capital LLC. If convicted of the securities fraud charge, Heide faces a maximum sentence of five years in prison and a fine of $250,000.
In addition to charging him with securities fraud, the SEC also slapped Heide with six civil fraud charges yesterday.
"From no later than February 2014 until July 27, 2018, 1 Global Capital LLC fraudulently raised more than $322 million from more than 3,600 investors nationwide in an unregistered securities offering," an SEC civil complaint filed yesterday states. "Heide played a significant role in the fraud by participating in the overstatement of the value of investors' accounts and their rates of return and misrepresenting the role of an accounting firm in 1 Global's marketing materials and on investors' monthly account statements."
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Per the complaint, Heide allegedly knew that 1 Global Capital was selling unregistered stocks and that those stocks were being used to fund the luxury lifestyle of the business's executives. The business allegedly promised that investors in 1 Global would make a quick buck by essentially giving out payday loans to other small businesses — 1 Global's marketing materials said the company would offer short-term cash advances (called merchant cash advances, or MCAs) to troubled businesses that otherwise couldn't qualify for more legitimate types of bank loans.
"In reality, the Company used substantial investor funds for purposes other than the MCAs, including paying operating expenses and funding the luxury lifestyle of its founder, Chairman and CEO, Carl Ruderman," the SEC complaint states. "Heide knew 1 Global's financial condition was depleted due to Ruderman and the Company's misuse of investor funds. Yet from June 2016 through February 2017, he regularly signed investors’ monthly account statements that he knew overstated the value of their accounts and misrepresented that the Company had an independent auditor that had endorsed the Company's method of calculating investor returns. Heide also had a role in the latter misrepresentation being included in certain 1 Global marketing materials."
Per the SEC, Heide knowingly lied to investors about the amount of money in the company's accounts and that an outside accounting firm was auditing the company's financial statements. In reality, the accounting firm hadn't checked any of the statements the company was sending to investors. The SEC said that, while 1 Global asked investors for a minimum $25,000 introductory investment, the company did not check to see if the investors were "sophisticated" and placed no limits on who could loan the company money.
"As a result of the Company and Ruderman's misuse and misappropriation of funds, 1 Global ran short of cash and filed for bankruptcy on July 27, 2018," the SEC wrote. "The Company subsequently ceased operations."