Back in March 2024, the New York Attorney General slapped Yellowstone Capital and its many-headed hydra of shell companies with a lawsuit for outrageous predatory practices. Fast forward to December 2024, and Yellowstone is coughing up a cool $1 billion to settle. But don’t get too excited—this settlement doesn’t mean the game is over. These deals are alive and well, and brokers are still gleefully peddling them like nothing happened.
Shell Companies: The Hydra of Predatory Lending
Yellowstone wasn’t just one bad actor—it was a whole circus of shady entities: Delta Bridge Funding, Fundry, High Speed Capital, and probably a few more that haven’t surfaced yet. Why so many? Because when the heat gets too close, these companies just rebrand, reorganize, and keep the scam rolling. It’s a classic move in the predatory MCA playbook. When I worked in the MCA space, everyone knew Yellowstone. Naturally, the brokers who worked there and similar shops worshipped Jordan Belfort from The Wolf of Wall Street although most were not qualified to tell someone how to rub two nickels together let alone properly finance their business.
The “Specified Percentage” Scam
Let’s talk about the “specified percentage” lie Yellowstone fed its merchants. On paper, repayments were supposed to flex with a business’s daily revenue. Sounds reasonable, right? In reality, Yellowstone locked merchants into fixed daily payments, even when their sales tanked. Have a slow week? Tough luck. Pay up, or we’re coming for your assets.
Confessions of Judgment: Legal Blackmail
Yellowstone didn’t stop at bleeding merchants dry—they made sure to gag them legally, too. Their weapon of choice? Confessions of judgment. Sign this little document, and you’re essentially handing over the keys to your bank account. If you miss a payment or dispute the terms, Yellowstone could seize your assets before you even knew what hit you. This isn’t just shady; it’s industrial-grade predation.
Highway Robbery in Plain Sight
Here’s a real kicker from Yellowstone’s playbook: an $8,000 funding deal with a 1.459 factor rate and an 80-day term. Translation? The merchant owed $11,672 in just over two months, making their daily payments $146. Effective interest rate? Hundreds of percent. And guess what? Brokers are still hawking deals like this today. Yellowstone may be gone, but the gouging continues, business as usual.
Borrowers, Take a Hard Look in the Mirror
Here’s the tough love you need to hear: if a deal like Yellowstone’s is the best you can qualify for, your business has some serious problems. These loans weren’t first-position funding—merchants had already burned through more reasonable options and came crawling to Yellowstone. Piling on debt at these rates is like trying to put out a fire with gasoline. It’s time to confront your business’s issues—slow receivables, lousy pricing, poor margins—instead of running to the nearest broker.
The Bottom Line
The Yellowstone collapse is a big headline, but it’s just the tip of the iceberg. The MCA space is still a minefield, with brokers leading merchants straight into financial quicksand. The takeaway? Don’t let desperation or slick broker talk lure you into deals like these. If you’re not fixing the underlying issues in your business, no amount of funding is going to save you.
Brokers won’t tell you this because it doesn’t pad their pockets—but we will.