By: Javi Calderon
Owner of Washington Payday Loan Store Accused of Ponzi Scheme
The Securities and Exchange Commission has filed a civil lawsuit against the owner of a bankrupt payday loan lender, the LittleLoan Shoppe, located in Spokane, Washington.
From 1999-2008 over 650 investors from the U.S, Canada, and Mexico purchased over $130 million in company stock, convinced by the owner that they would see annual returns of 40-60%, and that their investment was protected by insurance. The owner of the payday advance store even convinced investors that the business would not falter during the economic recession. Returns would come out of the company’s profits, even though the company was struggling.
New Investors were lied to and their money used to pay off original investors, the telltale sign of a ponzi scheme. While investors were being told that their money was going to growing the business, millions of dollars were going to maintaining a lavish lifestyle of gambling trips in Las Vegas, home improvements and expensive cars.
The Little Loan Shoppe and its parent company LLS America succumbed to bankruptcy in 2009 and Washington State officials sued the company in 2010 for affinity fraud. An affinity fraud is when one specific niche or pitch is used to lure in victims – in this case most investors were Jehovah Witnesses.
So far no criminal charges havebeen filed. The SEC is two years late to the party, but after their blunder with the Bernard Madoff scandal they seem intent to poke their nose in any issue of financial fraud. So far they have charged the owner with violating the antifraud and registration requirements of federal securities laws.
Ironically, Spokane has a long history of fraud. For three decades Forbes Magazine has chronicled scam activity in Spokane, even giving the city the title of, “Scam Capital of America” just two year ago. ‘
Washington State has relatively lax laws concerning payday loans. A customer can obtain up to $700 or 30% of their monthly income and can take out as many as 8 cash advance loans in a 12-month period.