FTC Wins $20 Million Judgment against Owner of Cash Advance Company

Random sample method used to calculate damages

In the case of Federal Trade Commission v. Jonathan Braun, decided on February 6, 2024 in the Southern District of New York after a jury trial, a federal court entered a judgment requiring merchant cash advance company owner Jonathan Braun to pay $20.3 million in monetary relief and civil penalties for misleading small businesses and unlawfully seizing their assets. Braun was found guilty of deceiving business owners about how much money he would advance to them and how much they would have to pay back.

Throughout the proceedings, Braun’s conduct was the focal point, revealing a pattern of disregard for consumers. The allegations against Braun centered around his unauthorized withdrawals from his customers’ accounts based on signed confessions of judgment the businesses were deceived into signing as part of their contracts. Evidence showed Braun bragging to his colleagues about instances in which he was able to collect more than what was owed from customer accounts. Braun was also hit with a permanent ban from the merchant cash advance and debt collection industries. 

The Court ruled that the FTC is entitled to $3,421,067 for consumer redress due to repeated violations of the FTC Act between 2017 and 2020. The FTC used random sample evidence to approximate the consumer harm caused by Braun, which is the amount that Braun over-collected or underfunded the factoring deals made with the small businesses. Braun contested the FTC’s methodology for estimating damages, arguing for a precise calculation of monetary harm suffered by the specific consumers rather than a reasonable estimate. However, the Court upheld the FTC’s right to seek monetary damages under Section 19 of the FTC Act, which has been subject to a burden-shifting framework for determining equitable relief. The FTC’s sampling satisfied its burden of proof, according to the Court.

The Court also imposed civil penalties of $16,956,000 on Braun for his violations of the Gramm-Leach-Bliley Act. Taking into account factors such as Braun’s degree of culpability, history of prior misconduct, ability to pay, impact on his ability to continue business and his treatment of consumers, the Court determined an appropriate penalty of $18,000 per violation. With Braun found responsible for 942 violations within the statute of limitations, the total civil penalty amounted to $16,956,000. 

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