Merchant Cash Advances and Misplaced Trust: SEC Charges Jacob Garfinkel in Alleged $4.5 Million Fraud

Published Oct. 1, 2026. Case statuses are current as of that date.

On Sept. 28, 2026, the Securities and Exchange Commission charged Skokie, Illinois-based companies 5G Funding and Five G Funding, and their CEO and owner Jacob Garfinkel, with operating an alleged investment fraud that raised about $4.5 million from at least 23 investors—almost exclusively within Orthodox Jewish communities in Illinois, New York, and New Jersey [1].

Important: These are civil charges. Garfinkel and the companies have not been convicted of a crime in this matter and are presumed not to have violated the securities laws unless and until a court finds otherwise.

How the alleged scheme worked

1. Affinity fundraising. From November 2021 through at least January 2023, the SEC alleges Garfinkel exploited trust within Orthodox Jewish communities to raise capital for a merchant cash advance (MCA) business [1].
2. Profit-split story. He allegedly claimed 5G Funding’s business was highly profitable and that he and investors would split net profits from MCAs funded by investors [1].
3. Hidden compensation. While some investor money went into an unprofitable MCA business, the SEC says he misled investors about his compensation and collected $1.1 million in “origination fees” out of the advances [1].
4. Diverted repayments. About $1 million in merchant repayments and other funds that were supposed to benefit investors were allegedly diverted for personal spending and transfers to related parties [1].
5. False track record. Defendants allegedly claimed Garfinkel had a track record of generating MCA returns when he had no prior experience, misrepresented portfolio performance, and entered into refinancing transactions to generate fees for themselves rather than for a legitimate business purpose [1].

The complaint, filed in the U.S. District Court for the Northern District of Illinois (No. 26-cv-11825), charges violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil penalties, and a conduct-based injunction barring Garfinkel from participating in securities offerings [1].

Merchant cash advances are short-term financing products sold to small businesses, not traditional bank loans. Marketing them as a steady, community-vetted investment can blur that risk: merchants default, portfolios sour, and fee structures can favor the operator. The SEC’s theory is not that every MCA is illegal, but that Garfinkel allegedly raised securities-like investments with false claims about profitability, experience, fees, and use of repayments [1].

Affinity fraud cases often surface slowly because victims hesitate to report someone from their own community. That delay can let losses grow. Anyone pitched a private lending or MCA “profit share” through a synagogue, school, or social network should treat it like any other securities offering—and verify it outside that network.

Red flags

• Investment pitches that lean mainly on shared religious or community identity.
• Promises of “profit splits” from specialty lending without audited books.
• Advisers who take large “origination fees” without clear disclosure.
• Inability to show prior industry experience that matches marketing claims.
• Refinancings that seem designed to generate fees rather than help merchants or investors.

What to do if you're targeted

1. Insist on independent audited financials before funding any MCA or private lending pool.
2. Check registration of the promoter and offering on Investor.gov and with your state securities regulator.
3. Get written fee disclosures; ask how origination fees and refinancings affect your return.
4. Talk to someone outside the social circle pitching the deal.
5. Report suspected affinity investment fraud to the SEC tip line and the FBI at ic3.gov.

Case status (as of Oct. 1, 2026)

Defendant	Court	Status as of Oct. 1, 2026	Source
Jacob Garfinkel	N.D. Ill. 26-cv-11825	SEC civil defendant; allegations unadjudicated	[1]
5G Funding LLC; Five G Funding LLC	Same	SEC civil defendants	[1]

Civil allegations are not criminal convictions. Statuses can change.

Sources

1. U.S. Securities and Exchange Commission, Litigation Release No. 26651, “SEC Charges Merchant Cash Advance Companies and their Founder for Operating an Alleged Investment Fraud,” Sept. 28, 2026. https://www.sec.gov/enforcement-litigation/litigation-releases/lr-26651

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