Yellowstone Capital Hit with $1 Billion Rip-Off

NEW YORK – Yellowstone Capital and its network of 25 predatory lending companies are facing a $1.065 billion reckoning after New York Attorney General Letitia James slammed them with a massive settlement for systematically ripping off small businesses. The scheme involved disguising high-interest loans as ‘merchant cash advances,’ a tactic used to prey on companies unable to secure traditional bank loans. The result? Businesses crippled by exorbitant rates, some forced to shutter, and livelihoods destroyed.

The Attorney General’s office alleges that Yellowstone, led by CEO Isaac Stern and President Jeffrey Reece, engaged in outright fraud. The company’s contracts deceptively claimed flexible payment terms tied to a business’s revenue. In reality, they were snatching fixed daily amounts directly from bank accounts, often within a brutal 60-90 day repayment window. While promising refunds if payments exceeded a pre-agreed revenue percentage, the AG’s investigation revealed a deliberate system to ensure those refunds never materialized. This effectively turned the ‘advances’ into loans with interest rates soaring as high as 820 percent annually – over 50 times the legal limit.

“Targeting small businesses with predatory loans and outrageous interest rates threatens the livelihoods of hardworking business owners and their employees,” Attorney General James stated bluntly. “Yellowstone and its executives lined their pockets at the expense of vulnerable small businesses who turned to them for help. Their predatory loans forced successful companies to close and put New Yorkers out of work.” The settlement mandates the cancellation of $534 million in outstanding debts for the businesses victimized by the scheme. An immediate payout of $16.1 million will be distributed to affected companies.

Here in New York, over 1,100 small businesses are set to receive debt relief. The victims range from a Buffalo food truck and caterer, to a Syracuse hair salon, and a Long Island tailoring shop. One Manhattan business, City Bakery, a caterer and bakery in Union Square, was also impacted. Nationwide, over 18,000 businesses will see their debts wiped clean. The AG’s office initiated the lawsuit against Stern, Reece, and the Yellowstone entities back in March 2024, following a thorough investigation that exposed the predatory practices.

While the $534 million debt cancellation and $16.1 million immediate restitution offer some relief, Yellowstone Capital and its officers remain liable for the remaining $514 million of the judgment. This isn’t just about money; it’s about accountability. The Attorney General’s office is sending a clear message: preying on small businesses won’t be tolerated. The Grimy Times will continue to follow this case and report on the distribution of funds to affected businesses.

This case underscores the urgent need for increased oversight of the merchant cash advance industry. While intended as a lifeline for businesses facing funding gaps, the lack of regulation has allowed predatory lenders like Yellowstone Capital to flourish, leaving a trail of financial ruin in their wake. Attorney General James promises to continue fighting to protect New Yorkers’ jobs and will pursue anyone attempting to exploit small businesses through fraud and deception.