WASHINGTON, D.C. — The Federal Trade Commission (FTC) has launched a significant legal action against Seek Capital and its CEO, Roy Ferman, alleging a deceptive business finance scheme that defrauded small business owners of more than $37 million. This move exemplifies the FTC’s efforts to safeguard small business entrepreneurs from misleading financial service practices.
The FTC’s complaint paints a troubling picture of Seek Capital’s operations. The company, which promoted itself as a leader in business loans, lured new and aspiring business owners with promises of accessible loans and lines of credit necessary for business expansion and operational expenses. Marketing materials boasted easy access to substantial funds, claiming pre-approval processes that lasted mere minutes.
However, the reality for those engaging with Seek Capital was starkly different. According to the FTC, instead of delivering on promises of liquid capital, Seek’s business model revolved around opening personal credit cards under the business owners’ names, unbeknownst to them. These credit cards, which business owners could have obtained independently, resulted in Seek charging a hefty fee of 10% of the total credit amount — often summing to thousands of dollars.
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, emphasized the agency’s dedication to protecting small business owners: “Starting or growing a small business is no easy task and it is made harder by those who deceive small business owners with false promises of liquid capital. The FTC will ensure that all consumers looking for financial products and services, including small business owners, are protected from those who break the law.”
Victims of Seek Capital’s scheme often discovered these unauthorized credit applications through alerts of credit score declines or unexpected bank communications regarding new credit cards. Attempts to cancel agreements with Seek were met with punitive early termination fees, sometimes as high as $995.
The fallout from Seek’s practices is profound. The FTC complaint highlights the financial distress and operational setbacks experienced by affected business owners. One entrepreneur lamented the near-collapse of their business due to Seek’s misrepresentations, noting, “My business plan got stalled and I did not expand my company as planned… My credit has still not recovered even though it has been almost one year. Seek did not provide the service that it promised. If I had known Seek would only apply for credit cards, I would have never signed up with Seek.”
Furthermore, the FTC charges Seek with manipulating its online reputation by coercing customers into posting favorable reviews and suppressing negative feedback. Contracts allegedly contained illegal clauses prohibiting clients from publishing negative reviews about Seek.
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