Investors sue consumer loan operator

A local consumer loan business operator has been sued for allegedly making “false representations” to secure $2.5 million in backing.

Investors sued Christopher Hodes, a Kansas City resident, in Johnson County District Court, claiming he misused the $2.5 million in financing they had arranged for the company, Star United Inc.

An attorney for the investors declined to comment. Hodes could not be contacted.

According to the suit, Hodes sought backing for his business plan. He had “a card product that offered consumer loans through employers using payroll advance debit cards,” according to the lawsuit filed last month.

The lawsuit said Hodes, whom it identified as chief executive officer of Star United, told investors the company had “signed agreements with a large customer base” and had the potential for more customers.

The investors, Michael Connor of Prairie Village and Thomas Williams of Marblehead, Mass., set up a line of credit for Star United. They say in the lawsuit that Hodes drew down the entire amount, but not entirely for the business.

Hodes immediately used $500,000 to repay a previous debt owed to Williams, the lawsuit said. It said he used $275,000 more to repay another personal debt and transferred an additional $600,000 “overseas to a Malta holding company,” all without the authorization or knowledge of the investors.

Star United agreed to pay interest rates ranging from 10 to 20 percent on the $2.5 million.

This story was originally published January 4, 2016 at 11:31 AM with the headline "Investors sue consumer loan operator."