Order Denying Motion to Dismiss. Defendants, both merchant cash advance (MCA) lenders, filed a motion to dismiss the Plaintiff-Trustee’s second amended complaint. The Trustee sought to avoid under 11 U.S.C. § 548(a)(1)(B) what he alleged were loan obligations incurred by the bankrupt debtor through the purported prepetition sale of its future receivables to the defendants. The Trustee also sought damages against the defendants under the civil liability provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO) as codified in 18 U.S.C. §§ 1962(a) and 1964(c), alleging that the defendants violated that act through unlawful debt-collection activity.
     The Court found that the Trustee pleaded facts sufficient to plausibly support a finding that the agreements underlying the dispute were disguised loans rather than sales, but it left a final determination on the nature of those agreements for a later stage in the proceeding. The Court also found that the Trustee succeeding in stating a RICO claim under 18 U.S.C. 1962(a) based on alleged unlawful debt-collection activity.
     To state a claim under § 1962(a), the Plaintiff must allege that (1) the Defendants derived income through the collection of an unlawful debt; and that (2) some part of that income was then used or invested, directly or indirectly, in the establishment or operation (3) of an enterprise, (4) which was engaged in or affected interstate commerce by its activities. United States v. Vogt, 910 F.2d 1184, 1193 (4th Cir. 1990); Blackburn v. A.C. Israel Enters., No. 3:22CV146 (DJN), 2023 WL 4710884, at *21 (E.D. Va. July 24, 2023).
    The Trustee pleaded the first of these elements by alleging that the agreements, treated as loans, provided for effective interest rates well above the threshold for criminally usurious loans under applicable New York law, and that the defendants collected hundreds of thousands of dollars from the debtor pursuant to those agreements. The Trustee pleaded the second and third elements by alleging that the defendants collected money from the debtor and reinvested it into their own operations, enabling them to further fund usurious loans to the debtor and others across the nation. Finally, the Trustee pleaded the fourth element by alleging that the defendants’ lending operations and collection activity spanned at least a handful of states in the U.S. The Trustee pleaded each of these elements with sufficient factual specificity to provide a plausible claim for relief.
    Because the Trustee’s second amended complaint plausibly state each claim for relief asserted therein, the Court denied the defendants’ motion to dismiss.