MyPillow and CEO Mike Lindell say they resorted to $600K in loan shark-like financing as judgments mounted

MyPillow needed $600,000, and fast. So last month CEO Mike Lindell opted for a merchant cash advance — similar to a payday loan for businesses — and agreed to repay more than $16,000 per day for the cash infusion.

Now the Minnesota company and its founder say the arrangement amounted to an illegal loan with extreme terms, including more than 360% interest and access to employee records.

A lawsuit filed in Carver County District Court last week claims the loan agreement was “usurious, unconscionable and thus unenforceable” and should be tossed out by the court.

The agreement was cast as the purchase of MyPillow’s unpaid invoices but was “merely a sham intended to evade the applicable usury laws,” the lawsuit said. Usury laws cap interest rates for many loans; though the lawsuit was filed in Minnesota, it relies on New York usury laws.

The New York-based financial companies named in the suit, Lifetime Funding and CapSpot Financial, did not immediately respond to requests for comment. A third company named as a defendant, FunderZ, could not be reached.

Money has been tight for Chaska-based MyPillow, which Lindell has chalked up to getting “canceled” by big retailers in response to his quest to prove election fraud. Lindell is a staunch supporter of former President Donald Trump.

MyPillow is “a cash-strapped business that needed funds quickly,” the lawsuit said.

Last year, MyPillow auctioned off equipment and downsized its real estate as a result of the lost business. Lindell said at the time the company’s line of credit had been lowered, and this summer MyPillow faced eviction proceedings over unpaid rent.

Last month, a shipping company sued over an unpaid bill, and last week an appeals court considered Lindell’s challenge to a $5 million arbitration award stemming from his “Prove Mike Wrong” contest in which he challenged anyone to prove that his data regarding election fraud was not valid.

Lindell and his company also remain mired in three federal libel lawsuits with more than $1 billion in potential judgments at stake and millions owed to attorneys.

Lindell and MyPillow take a swing in the lawsuit at the merchant cash advance industry as a whole, saying in the suit it “is essentially loan sharking” and lenders use “improper tactics and devices to ensure that they will be repaid at grossly inflated rates by hook or by crook.”

The Merchant Cash Advance Association says in its code of ethics “the ability to access capital through a streamlined and painless process is paramount to the success of a small business.”

Lindell initially agreed to the $600,000 merchant cash advance, which would cost $840,000 to repay, in order to get a real estate loan from Lifetime, according to court filings. The company “refused to honor its commitment” and that loan never came to fruition, the suit says. Lindell and several of his other companies, including Lindell Media and Lindell-TV, guaranteed the cash advance and would be on the hook.

The lawsuit says the cash advance agreement was “designed so that the entire arrangement would inevitably fail and cause MyPillow to default,” which would prompt a windfall for the funders.

The suit alleges Lifetime, CapSpot, FunderZ and several individuals involved in the companies issued illegal loans and committed wire fraud and conspiracy and violated the Racketeer Influenced and Corrupt Organizations (RICO) Act.