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Law Firms Announce Investigation of Potential Class Action Against Microcap Toxic Lenders

Today, two New York law firms, The Basile Law Firm P.C. and Phillipson & Uretsky, LLP announced that they have opened an investigation into a potential class action lawsuit against New York based lenders of short-term loans to microcap companies trading on the OTC Market.

The class action being investigated and considered is on behalf of OTC Market public microcap companies that have issued convertible redeemable notes that contain both a conversion discount of more than 25% to the market price of that issuers stock, as well as having reserved a multiple of an amount of shares at the time of the closing that would allow the indebtedness reflected by said note to be converted into shares of the issuer based at the discount.

The law firms are investigating potential claims for damages on behalf of the class for an estimated aggregate amount of more than $1 Billion in lost market capitalization and possible violations of the Civil RICO statute for the collections of an unlawful debt, premised on New York State’s criminal usury statute (New York Penal Law 190.40). The law firms are also investigating whether there are compensable damages that may have been caused by the conduct of these lenders and whether such conduct violates the Securities and Exchange Act of 1934.

Potential class action members include microcap public companies trading on the OTC Markets that issued a convertible note to a lender in New York after October 1, 2014 that featured

1) an exclusive conversion option of the lender to convert the indebtedness into public company stock at a discount of more than 25% to the market price of the securities

or

2) issued a “commitment” note in connection with an Equity Line of Credit where the purchaser of that note paid less than the face amount of the principle stated on said note.

To sign up as a potential class action member, click HERE.