You are here: / / A LOAN AGREEMENT WHICH ALLOWS THE LENDER TO CONVERT THE BALANCE TO SHARES...
, , ,

A LOAN AGREEMENT WHICH ALLOWS THE LENDER TO CONVERT THE BALANCE TO SHARES OF STOCK AT A FIXED DISCOUNT CAN VIOLATE THE USURY STATUTE, WHICH WOULD THEREBY RENDER THE AGREEMENT VOID AB INITIO (CT APP).

The Court of Appeals, in a full-fledged opinion by Judge Wilson, over a partial dissent. answered two questions posed by the Second Circuit in the affirmative. “1. Whether a stock conversion option that permits a lender, in its sole discretion, to convert any outstanding balance to shares of stock at a fixed discount should be treated as interest for the purpose of determining whether the transaction violates N.Y. Penal Law § 190.40, the criminal usury law. 2. If the interest charged on a loan is determined to be criminally usurious under N.Y. Penal Law § 190.40, whether the contract is void ab initio pursuant to N.Y. Gen. Oblig. Law § 5-511:”

GeneSYS ID, Inc. (“GeneSYS”) is a publicly held corporation that produces various types of medical supplies. Adar Bays, LLC is a limited liability company based in Florida. On May 24, 2016, Adar Bays loaned GeneSYS $35,000. In exchange, GeneSYS gave Adar Bays a note with eight percent interest that would mature in one year. The note included an option for Adar Bays to convert some or all of the debt into shares of GeneSYS stock at a discount of 35% from the lowest trading price for GeneSYS stock over the 20 days prior to the date on which Adar Bays requested a conversion. Adar Bays could exercise its option starting 180 days after the note was issued and could do so all at once or in separate partial conversions. …

Six months and four days after the note was issued … Adar Bays requested conversion of $5,000 of debt into 439,560 shares of stock. GeneSYS refused … seeking to renegotiate the loan. … GeneSYS was trading for $0.024 per share, the conversion price was $0.011. Adar Bays … sued GeneSYS in the … Southern District of New York for breach of contract. GeneSYS filed a motion to dismiss arguing the contract was void because the loan’s rate of interest, including both the stated interest and conversion option, exceeded the criminal usury rate of 25%. Adar Bays, LLC v GeneSYS ID, Inc., 2021 NY Slip Op 05616 CtApp 10-14-21

 

You might also like
“Home or Business Exception” to Criminal Possession of a Weapon Does Not Apply to Defendant Previously Convicted of a Crime
DEFENDANT APPEARED IN COURT WITH A SUBSTITUTE COUNSEL WHO INFORMED THE COURT ANOTHER LEGAL AID LAWYER WAS BEING ASSIGNED TO DEFENDANT’S CASE; DEFENDANT WAS NOT “WITHOUT COUNSEL” WITHIN THE MEANING OF CPL 30.30; THE ASSOCIATED SPEEDY-TRIAL TIME-PERIOD SHOULD HAVE BEEN CHARGED TO THE PEOPLE, NOT THE DEFENDANT (CT APP). ​
THE ACCUSATORY INSTRUMENT CHARGING THE DEFENDANT WITH “FRAUDULENT ACCOSTING” WAS FACIALLY SUFFICIENT; IT WAS ENOUGH TO ALLEGE THAT DEFENDANT SPOKE FIRST TO PERSONS PASSING AROUND HIM ON THE SIDEWALK ASKING FOR DONATIONS FOR THE HOMELESS; THERE WAS NO NEED TO ALLEGE DEFENDANT WAS AGGRESSIVE OR PERSISTENT OR TARGETED AN INDIVIDUAL (CT APP).
“Substantial Factor in Producing the Injury” Jury Instruction (Re: Causation) Did Not Reduce Plaintiff’s Burden of Proof
NYC POLICE OFFICERS IN THE TIER 3 RETIREMENT SYSTEM ARE ENTITLED TO CREDIT FOR PERIODS OF UNPAID CHILDCARE LEAVE (CT APP).
DEFENSE COUNSEL NOT INEFFECTIVE; EVIDENCE OF CHILD’S MULTIPLE DISCLOSURES OF SEX ABUSE WAS NOT BOLSTERING; DEFENSE COUNSEL ARTICULATED LEGITIMATE REASONS FOR NOT CALLING A MEDICAL EXPERT.
IN THE CONTEXT OF DRIVING WITH A SUSPENDED LICENSE, THE COURT OF APPEALS EXPLAINED THE CRITERIA FOR A VALID MISDEMEANOR COMPLAINT, VERSUS A MISDEMEANOR INFORMATION (CT APP). ​
CPLR 1601 DOES NOT ALLOW DAMAGES TO BE APPORTIONED AGAINST THE NON-PARTY STATE IN A NEGLIGENCE ACTION IN SUPREME COURT.

Categories

Sign Up for the Mailing List to Be Notified When the Site Is Updated.

  • This field is for validation purposes and should be left unchanged.

Copyright © 2025 New York Appellate Digest, Inc.
Site by CurlyHost | Privacy Policy

IN HIS MOTION TO WITHDRAW HIS PLEA TO CRIMINAL POSSESSION OF WEAPONS, DEFENDANT... DEFENDANT WAS A DINNER GUEST IN HIS FRIEND’S APARTMENT WHEN THE POLICE...