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(Reuters) — A company that advances money to people awaiting settlement payouts was accused by New York and federal regulators of scamming sick responders to the Sept. 11, 2001 attacks, as well as National Football League retirees with brain injuries.
RD Legal Funding L.L.C. and founder Roni Dersovitz allegedly cheated victims out of millions of dollars by deceiving them about the terms of its advances, according to a lawsuit filed on Tuesday by the U.S. Consumer Financial Protection Bureau and the office of New York Attorney General Eric Schneiderman.
Victims of the Cresskill, New Jersey-based company allegedly included firefighters, police officers and other 9/11 first responders suffering from cancer, other respiratory illnesses, stress and depression.
They also allegedly included NFL players suffering from Alzheimer's disease and other football-related illnesses that entitled them to money from the league's estimated $1 billion class-action settlement in 2015.
According to the lawsuit filed in Manhattan federal court, victims often ended up repaying more than double the sums they received upfront, at interest rates that could top 250%.
"RD Legal scammed 9/11 heroes and NFL concussion victims out of millions of dollars," CFPB Director Richard Cordray said in a statement. "Our lawsuit seeks to end this illegal scheme and get money back to those entitled to receive it."
Jerome Reisman, a lawyer for RD Legal Funding, declined to comment. Mr. Dersovitz did not immediately respond to a request for comment.
Regulators said RD Legal would contact first responders after learning they were eligible for the Zadroga fund, set up by Congress to assist with medical costs and lost income, promising to "cut through red tape" and get their money back quickly.
But regulators said the cost was high. In one case, they said a female first responder who received an $18,590 advance ended up repaying $33,800 a mere six months later.
Tuesday's lawsuit accused RD Legal of violating federal laws against abusive consumer finance practices, as well as New York state fraud and usury laws. It seeks restitution, civil fines and other remedies.
The U.S. Securities and Exchange Commission has a separate legal case pending against Mr. Dersovitz and his hedge fund firm RD Legal Capital L.L.C.
It said the defendants misled investors about the risks of their investments, including a big bet that litigation tied to the 1983 bombing of the U.S. Marine barracks in Beirut would pay off. Mr. Dersovitz has been defending against the SEC claims.
A federal appeals court on Monday approved a class action settlement that may cost the National Football League $1 billion.