As Sprout saga smolders, ex-CEO’s spouse kinds new lender

Whereas Michael Strauss has absconded from large liabilities and court docket instances over the demise of Sprout Mortgage, his spouse and a former affiliate are operating a brand new mortgage store.

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It is unclear if the embattled industry executive is concerned with the Irvine, California-based Investor Funding Corp., which his partner, Elizabeth Strauss, based in 2024 in line with public data. Nevertheless, she beforehand helped Michael Strauss set up a short-lived mortgage agency which misplaced its license a yr after Sprout’s 2022 shutdown. 

The Mortgage Scoop first reported the information of the brand new Strauss enterprise. A former Sprout government additionally referenced the corporate in regard to the Strausses, in a social media publish final week. 

Investor Funding Corp. has three staff per Nationwide Multistate Licensing System data, and is registered to do enterprise in 4 states. The workers embody Vinh Nguyen Luu, who self-reported in NMLS data as Sprout’s former senior vp of servicing. 

It is unclear if Luu was part of the mass layoff Sprout undertook in July 2022, when it was one among just a handful of mortgage lenders to shutter when rates of interest started their post-covid rise. Whereas Elizabeth Strauss was briefly entangled in Sprout’s sprawling chapter case, Investor Funding Corp. in any other case has no different relationship to Sprout or Michael Strauss. 

Neither Luu nor Elizabeth Strauss, who fashioned the fleeting Good Price Mortgage along with her husband in 2022, responded to cellphone calls looking for remark Friday. 

Michael Strauss in the meantime has left knowledgeable and private mess on the East Coast, together with Sprout’s chapter case wherein practically 300 collectors are looking for over $87 million, per court docket data accessed Friday. A whole bunch of laid off Sprout staff are additionally nonetheless looking for thousands and thousands of {dollars} of owed backpay, in a court docket case that would crumble resulting from Michael Strauss’ inaction. 

No reduction in sight for Sprout staff, collectors

Three former Sprout executives — Elliot Salzman, Christopher Wright, and Shea Pallante — were cleared of wrongdoing final yr within the wage case by former staff, and as we speak all sit in management roles at varied monetary establishments. The ex-Sprout staff in the meantime have but to recuperate any reduction over their abrupt firing in 2022, when Sprout additionally retroactively canceled their healthcare funds.

Michael Strauss agreed to pay over 100 former staff a $3.5 million settlement in 2023, however the fee was halted at the onset of Sprout’s bankruptcy case, which was filed on behalf of collectors. Attorneys for the workers indicated to a choose earlier this month they’d transfer to file for default judgment towards Michael Strauss. 

The choose replied nonetheless with a menace to suggest to his superior to shut the three-year previous case, if plaintiffs can not serve discover on Michael Strauss per court docket process. The case as of Friday remained pending. 

The Sprout chapter case in the meantime exhibits no indicators of resolving quickly, as 289 claims stay. Of the over $87 million collectors are looking for, $28 million in unpaid federal taxes to the Inside Income Service has been designated as a precedence. The list of creditors consists of different mortgage business counterparties, state income companies, and different outdoors entities together with the Wynn resort in Las Vegas, looking for over $26,000 in unpaid conference charges. 

Michael Strauss additionally owes over $3 million in taxes to New York, in line with state data. He moreover owes six- and seven-figure liens on a Manhattan penthouse and a Hamptons home.

The trustee for Sprout Mortgage in its chapter case has beforehand described Michael Strauss’ dealing with of Sprout’s funds as akin to money laundering, as he used the lender’s coffers to pay for his residences, horse racing and breeding actions, and faculty bills for his daughter. In accordance with case paperwork, at the very least $27 million was transferred from Sprout accounts to entities and insiders associated to Strauss forward of the 2023 chapter submitting. 

The previous Sprout chief’s resume additionally features a $2.45 million settlement with the Securities and Alternate Fee in 2009, over his actions as CEO of American Residence Mortgage which collapsed in the course of the Nice Monetary Disaster.