Mike Lindell, the CEO of MyPillow, has filed a lawsuit against two loan providers, claiming his company was misled into taking out a $1.6 million loan with an exorbitant 409% interest rate. The lawsuit, filed in Minnesota, names Cobalt Funding Solutions and Streamline Advance as the defendants.
According to Lindell, MyPillow, along with several related entities, was given the loan through a merchant cash advance agreement. These types of loans allow lenders to bypass traditional interest rate caps, often targeting businesses in financial distress that have few other lending options. Merchant cash advances are often likened to payday loans for businesses due to their high interest rates and terms.
Lindell’s legal team argues that the terms of the agreement were misrepresented. The lawsuit asserts that, despite being marketed as the purchase of future receivables, the agreement did not involve any actual sale of receipts. The attorneys call the deal “a sham intended to circumvent usury laws.” The agreement would have required MyPillow to make 50 daily payments of over $45,000, totaling $2.3 million, along with a $125,000 upfront “origination fee.”
MyPillow has previously found itself in legal disputes involving merchant cash advances, though in those cases, the company was the defendant. In October, Lifetime Funding sued MyPillow for failing to repay a $600,000 loan, followed by another lawsuit from Shine Capital Group for missed payments on a $2 million loan.
The merchant cash advance industry is known for targeting struggling businesses and saddling them with overwhelming debt at steep interest rates. This largely unregulated sector leaves little room for businesses to fight back. At the time MyPillow took out the loan, it was in a financially precarious position. Although the company once boasted $300 million in annual sales, Lindell’s promotion of election fraud conspiracies after the 2020 election led to the product being pulled from major retailers, resulting in a significant decline in sales. Lindell disclosed that MyPillow lost $100 million in sales last year.
While Lindell’s attorney, Barbara Podlucky Berens, declined to discuss why MyPillow sought out a merchant cash advance, she acknowledged her law firm’s negative experiences with similar providers. Berens’ firm had previously sued Apex Funding Source for predatory lending practices in a case involving $1.2 million in loans. The lawsuit also names Sam Berger of Cobalt and Shawn Rodgers of Streamline as defendants.
Neither Cobalt nor Streamline has provided comment on the ongoing lawsuit.
