In a recent legal filing, Fund411 Inc., operating as FundMerica, has launched a lawsuit against Centrex Software LLC, its Vice President Trey Markel, Forth Inc., and its CEO Kris Kehler. The lawsuit, filed in the Superior Court of California, County of Orange, on June 4th, 2024, seeks damages exceeding $1 million. The allegations center around claims of breach of contract, breach of fiduciary duty, fraud, negligence, and conversion of confidential financial information.
Centrex, a leading provider of CRM services within the Merchant Cash Advance (MCA) and Financial Services industry, is being accused of sending private client data to third-party outlets for monetization. Data including, but not limited to, merchant applications, bank statements, corporate financials, personal identifications, and more.
Sources are currently identifying the parties directly involved.
If these allegations are substantiated, the implications for the Merchant Cash Advance (MCA) industry are profound. The industry, which relies heavily on technology to manage and protect sensitive data, may face a critical turning point.
Centrex has stated that the incident was merely a security breach and not an intentional act of sharing data with third-party financial services companies. Open letters asserting this claim have been emailed to all active users of the Centrex CRM platform. Despite these assurances, the lawsuit and our sources present a compelling argument suggesting otherwise.
Here are the key points in the lawsuit:
Parties Involved:
- Plaintiff: Fund411 Inc. d/b/a FundMerica, a California corporation.
- Defendants:
- Centrex Software LLC, a California limited liability company.
- Trey Markel, Vice President of Centrex Software LLC.
- Forth Inc., an Illinois corporation.
- Kris Kehler, CEO of Forth Inc.
Claims:
- Breach of Contract:
- Defendants breached the "Centrex Software Subscription & License Agreement" by allowing data leaks of confidential financial information.
- Breach of Fiduciary Duty:
- Defendants owed a fiduciary duty to safeguard the confidential financial data, which they breached by allowing data breaches and leaks.
- Fraud:
- Defendants misrepresented their ability to safeguard confidential information, which they knew they could not do.
- Negligence:
- Defendants failed to act according to industry standards in securing the confidential financial data.
- Conversion:
- Defendants misappropriated and used the confidential financial information for their benefit, excluding the rightful possessory interests of FundMerica.
Allegations:
- FundMerica entered into an agreement with Centrex on October 25, 2017.
- Centrex and Forth were responsible for the protection and security of confidential financial data provided by FundMerica's merchants and customers.
- There have been significant and numerous data leaks within the last 12 months, causing damage to FundMerica, its merchants, and customers.
- FundMerica suspects these data breaches are due to compromised passwords, vulnerabilities in the API, or unauthorized data dissemination by Centrex and Forth.
- Defendants admitted loose access controls and a discovered vulnerability in their systems.
Damages:
- FundMerica claims to have suffered business losses, reputational harm, and incurred millions of dollars in damages due to the defendants' actions.
- The plaintiff seeks compensatory damages exceeding $1,000,000, attorneys' fees, pre- and post-judgment interest, and injunctive relief.
The MCA industry must confront several pressing questions:
- How can it ensure the security of the data entrusted to technology and software providers?
- When will the industry adopt a more ethical approach, prioritizing integrity over quick profits?
- What are the immediate steps required to enhance data security and protect the interests of millions of small business owners?
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