Nothing makes me shake my head in agony like hearing how some people that live off trust funds behave. Why is it every time a “trust fund baby” gets brought into the conversation that there’s some form of buffoonery?
Factoring company closed, funds unavailable…
This morning thousands of trucking companies found themselves without money to pay employees, buy fuel, or even afford basic necessities after CoreFund Capital, a major freight factoring provider, shut down its business without any warning. What appears to be a selfish family squabble has put many businesses in a dangerous position. Also, it brings the danger of contracts to the forefront.
On July 18, drivers and businesses were shell-shocked to learn CoreFund had shut down, locked everything down, and went off the scope. Employees found out that morning they were all terminated with prejudice. Bank accounts were empty, computer systems locked, and phones were disconnected. Luckily for clients, the Facebook account was still going and someone was able to post what little they knew.
Rich kids and their trust funds
According to court documents, Meir “Shim” Sacks founded CoreFund Capital in 2014. CoreFund itself is a wholly owned subsidiary of GMA Fund LLC, the holding company for the Shim Sacks Family Legacy Trust. Sacks created the trust fund in October 2014. As part of the original trust, Shim Sacks granted special power of appointment to his brother, Yaakov “Jacob” Sacks. And that’s where it gets interesting.
According to the court filing, Jacob Sacks “exercised this special power of appointment he holds” under the original trust and transferred everything, including the holding company that owns CoreFund, into a new trust that he created – the “Sacks Family Grandchildren’s Trust,” on July 12.
The original trust only named Shim Sacks’ children as beneficiaries, but the new trust fund lists both brothers’ children as beneficiaries. It also named CoreFund’s longtime president, Bonnie Castillo, as the sole manager of CoreFund. Was that on purpose, or to put the heat of a thousand angry client’s on her head?
Show me the money!
For those wanting their funds to continue running their businesses, it is not as simple as you might think. There’s this little thing called the Form-UCC1 that CoreFund has hanging over all of its clients.
The UCC-1 is a legal form that states that the factoring company has an interest in the property of their clients. Essentially, a UCC-1 form is a lien that a factoring company places on a business showing the factoring company’s secured interest in clients’ accounts receivable.
Before a creditor approves a business for financing, it will do a lien search, and if your business has an active UCC-1 filed against it, your ability to obtain new financing may be delayed, subject to negotiation between creditors, or even declined. It will depend on the collateral that each creditor has an interest in.
How to cut the Gordian Knot
For the drivers and businesses trying to cut this Gordian Knot of a situation, there is hope. A court-appointed receiver has been named to handle “trying” to make sense of this mess, get the UCC-3 forms that release the liens from CoreFund to the clients, and hopefully find the funds to pay out all the submitted claims.
FreightWaves’ Clarissa Hawes has posted an article about this horrible mess created over a trust fund fight.
This is a developing story, with the court punting until hearing the case next Monday. BTU and FreightWaves will monitor and report on this evolving case.
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