Mike Lindell, the CEO of MyPillow and a prominent supporter of former President Donald Trump, has found himself embroiled in yet another legal battle. This time, Lindell and MyPillow are taking the offensive, suing several merchant cash advance funding companies over what they claim are illegal loan terms and RICO, according to a report by the Star Tribune.
The Financial Squeeze
MyPillow, facing a cash crunch, recently sought $600,000 in quick financing. The company opted for a merchant cash advance, a type of financing for businesses where the future receivables of the business are purchased at a discount. There are tens of billions worth of MCAs funded each year in the US and it's only growing.
The funding companies named in the suit are Lifetime Funding, broker CapSpot Financial, and FunderZ Group which is described as handling ACH withdrawals, reporting, and deal tracking, Under the agreement, MyPillow committed to repaying over $16,800 per day for a total of $840,000. My math says this is a 1.40 factor rate over approximately 50 payments.
In addition, allegedly, the broker from CapSpot told Lindell that he could get a real estate loan, which he was seeking in the first place, to use for 2 properties in Minnesota but only after taking an MCA. Needless to say that real estate loan never transpired.
However, Lindell and MyPillow now argue that this arrangement constitutes an illegal loan with extreme terms, including:
An interest rate exceeding 360%
Access to employee records
Daily repayments of more than $16,000
Legal Challenge
The lawsuit, filed in Carver County District Court, seeks to have the loan agreement declared "usurious, unconscionable and thus unenforceable." Lindell's legal team argues that while the agreement was framed as a purchase of MyPillow's future receivables, it was actually a "sham intended to evade the applicable usury laws".
The arguments made in this lawsuit, according to the report, are similar to so many before it that have ultimately failed. It will be interesting to watch though given who Mike Lindell is, who he knows, and whether he can even afford to get through the case.
Financial Pressures
This legal action comes amidst ongoing financial difficulties for MyPillow. Lindell attributes these challenges to being "canceled" by major retailers in response to his claims of election fraud. The company has taken several steps to address its financial situation:
Auctioning off equipment
Downsizing real estate holdings
Facing lowered lines of credit
Broader Context
This lawsuit is just one of several legal and financial challenges facing Lindell and MyPillow. The company has been involved in multiple lawsuits related to Lindell's claims about the 2020 election, including a $1.3 billion defamation suit from Dominion Voting Systems. Dominion won a similar case against Fox News for $787 million.
As this case unfolds, it will highlight the intersection of business finance, politics, and legal strategy in the current economic and political landscape. The outcome could have significant implications for the broader merchant cash advance industry and certainly for Mike Lindell and MyPillow.
Download the full Civil Complaint below
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