Newly appointed Lt. Governor Brian Benjamin stands to make a hefty profit from insider stock he holds in a company that arranges loans with interest rates up to 500% and has been sued repeatedly, THE CITY has learned.
Gov. Kathy Hochul recently tapped Benjamin for her old job after she succeeded Andrew Cuomo, who resigned amid sexual harassment allegations and other scandals.
Benjamin, a Manhattan state senator for the past four years, is set to be sworn into his new role on Thursday.
The Harvard Business School grad got the inside edge via his role as a founding board member of Next Point Acquisition Corp., an investment firm that earlier this year bought the oft-sued California firm LoanMe, records show.
Benjamin resigned from NextPoint’s board in March, but kept his stock. THE CITY estimates that Benjamin could net a hefty $80,000 profit off what appears to be his initial $4,100 investment if he sold the stock tomorrow on the Toronto Stock Exchange where it’s traded.
The California-based LoanMe arranges small personal and business loans for borrowers with troubled credit histories, using banks in states with few restrictions on interest rates. LoanMe borrowers are then on the hook for interest rates of 98% to 500%, plus fees, according to rates in some states posted on the company’s website.
LoanMe does no business in New York because interest rates on most loans are by law capped at 16% per annum. The state considers rates higher than 25% to be criminal.
LoanMe has been sued 33 times in seven states in the last five years, records show. The firm has settled all but two of those lawsuits under terms that remain sealed, records show.
In some suits, consumers charged that LoanMe bombarded them with texts and robo calls pushing them to take out loans. In others, borrowers alleged LoanMe employed similar harassment if they were late with payments.
Some borrowers have also alleged LoanMe reported to credit rating agencies that they still owed money even after they’d paid their debts — an erroneous claim they said destroyed their credit.
Benjamin’s Past Loan Woe
It’s unclear why Benjamin — a former investment banker at Morgan Stanley and failed city comptroller candidate — chose to invest in a company like this.
Confronted last week by THE CITY, Benjamin declined through a spokesperson Monday to comment on LoanMe’s track record. But he confirmed that he still owns the NextPoint stock that in December he listed in his financial disclosure forms as being worth between $75,000 and $100,000.
The spokesperson, Neil Reilly, wrote in an email to THE CITY Monday: “The senator’s stock holdings have not changed since his last disclosure.”
Reilly wrote that Benjamin is now “working with counsel on a recusal related to NextPoint and its subsidiaries to ensure that his service to the people of the state of New York is free from any appearance of conflict.”
Meanwhile, Benjamin has experienced the stress of loan debt himself: A condominium he once owned in Providence, R.I., was foreclosed upon in 2011, seven years after he purchased the studio unit, THE CITY has learned.
Suzanne Moniz, a former treasurer of the complex’s homeowners association, said he failed to pay his home owners fees for well over a year — and only settled up after the threat of legal action.
“Maybe he’s seen the light and become a more responsible person,” she said. “I certainly hope so.”
Reilly said that Benjamin moved back to New York in 2006 and became overwhelmed by rental payments in the city and his mortgage in Rhode Island.
“Unfortunately, like too many others during the crisis, he had difficulty making payments — particularly while also paying rent in New York City — and his home was foreclosed upon,” Reilly in a statement. “That inspired him early in his career to build and support real affordable housing in Harlem — creating over a thousand environmentally sustainable units in the community — and he will bring that experience to his service as lieutenant governor to improve the lives of New Yorkers.”
Stock Took Off
Benjamin’s foreclosure drama came well before his lucrative stock deal.
Records filed with the Toronto Stock Exchange reveal that last year Benjamin and five other original investors in NextPoint appear to have each invested about $4,100 on private insider shares that were ultimately priced at 48 cents. Once NextPoint went public in July, the shares jumped dramatically in value.
The stock opened at $11.12 on July 7 and has since risen and then dropped, only to climb again to $13.29 per share Thursday. By Friday, NextPoint had fallen to $8.60.
His initial investment of about $4,100 would now be worth just short of $85,000, THE CITY estimates. Benjamin refused to discuss the current value of his stock.
He got the private deal as a co-founder, board member and original investor in NextPoint Acquisition Corp., a Canada-based investment outfit created in July 2020 to buy other companies. As NextPoint formed, Benjamin — along with four other board members and a sponsor — bought some 5.9 million private shares for an aggregate $25,000, records filed with the Toronto Stock Exchange state.
The founders immediately relinquished about 760,000 shares, reducing the total share amount to just over 5.1 million. That comes out to .0048 cents per share. If the six members split the cost evenly, that would mean they each put in $4,166 to acquire some 985,500 shares each.
In February, when Benjamin was still on the board, NextPoint announced it had “entered into definitive agreements” to purchase two companies, LoanMe and Liberty Tax, to “create a one-stop financial services destination for consumers and small businesses,” according to a company press release. Part of the notion was that taxpayers who owed the IRS could borrow via LoanMe.
LoanMe specifically arranges loans ranging from $300 to $250,000 with banks located in states that don’t cap interest rates. On its website, for instance, it describes interest rates in Delaware and Missouri around 99%. In Texas, they could be as high as 500.15% per annum.
That means if a customer borrowed $1,200 and paid it off within two weeks, they’d owe a total of $3,131.
The company charges an upfront fee based on the size of the loan.
“High-cost installment loans are as dangerous or worse than short-term payday loans,” Lauren Saunders, associate director of the National Consumer Law Center, told THE CITY. “They have very high rates.”
Lawsuits Spell Out Accusations
According to theToronto Stock Exchange records, it appears Benjamin participated in the decision to buy these companies. NextPoint’s board met three times in 2020 during the time this acquisition was underway.
All board members — including Benjamin — attended the meetings, the records state. Benjamin declined to answer THE CITY’s questions about what due diligence he did on LoanMe as a NextPoint board member.
NextPoint then moved to go public, converting the board members’ shares at a rate of 100 to one and estimating its value for the upcoming initial public offering at $10 per share. That meant each board member now had about 9,855 shares worth a total $98,550.
In his 2020 financial disclosure form, Benjamin estimated the worth of his NextPoint stock to be between $75,000 and $100,000 as of Dec. 31. That was several months before the planned IPO and weeks before NextPoint formally announced on Feb. 22 it had “entered into definitive agreements” to acquire LoanMe and Liberty Tax.
By that time, anyone who did any basic research into LoanMe would have discovered it had been sued 33 separate times in federal court in seven different states from coast to coast. The lawsuits alleged a wide variety of bad behavior, records reviewed by THE CITY show.
Last November, Harrisburg, Pa., resident Danielle Katen filed suit accusing LoanMe of erroneously reporting to credit rating companies that she had an open account with them.
The effect of this was devastating to her credit rating, the suit alleges. LoanMe settled in January. Katen couldn’t be reached for comment and her attorney did not respond to THE CITY’s inquiries.
Oshkosh, Wis., resident Brian Marx got his credit report from Experian showing LoanMe “incorrectly reporting” him as in Chapter 13 bankruptcy and erroneously claiming he was late with his November 2018 payment, according to his lawsuit.
LoanMe settled in March 2020. Neither Marx nor his attorney responded to THE CITY’s request for comment.
California resident Hillary Mosher filed a class-action suit against LoanMe last year after she was bombarded with texts from the company pressuring her to take out a small business loan.
Her attorney, Ronald Marron, contended in court papers that this practice was systemic, and demanded LoanMe pay his client $1,500 for every hectoring text. The firm settled with her in October. Marron declined to comment.
Benjamin Quit Board
LoanMe also has ties to SettleIt, a California-based debt-settlement business that recently agreed to settle a consumer fraud case with the federal Consumer Financial Protection Bureau (CFPB).
In April, the CFPB filed a complaint against SettleIt alleging that LoanMe would transfer indebted customers who’d fallen behind in payments directly to SettleIt — which would not disclose its ties to LoanMe while helping borrowers “settle” their debts. The CFPB further alleged that SettleIt reached agreements with borrowers that were favorable to LoanMe.
In July, SettleIt — without admitting or denying wrongdoing — agreed to pay $646,000 in restitution to customers of LoanMe and another personal loan outfit who’d paid them fees. The company also agreed to pay a $750,000 civil penalty, and stop settling debts from LoanMe and the other firm, court records show.
THE CITY left several phone messages with LoanMe but none were returned. Scott Hyman, an attorney who has represented LoanMe in multiple lawsuits, declined to discuss the cases and said he would obtain contact information for LoanMe executives. He subsequently did not provide any further information.
Attorneys representing SettleIt did not return calls from THE CITY seeking comment.
On March 15, Benjamin resigned from NextPoint’s board after the Daily News reported on his involvement with the firm, according to his spokesperson. A month later NextPoint put out a statement announcing that he’d stepped down “to focus on his political career.”
The statement did not disclose that Benjamin had held on to his private stock in NextPoint.
Earlier this year, Benjamin launched an unsuccessful bid for city comptroller. In January, THE CITY revealed contributions to his campaign that some named donors said they never made. The city Campaign Finance Board is now looking into those contributions, which Benjamin promised to return after THE CITY’s report.