He Grew Up in the Shadow of the ‘Wolf of Wall Street.’ Then He Got Into Debt Settlement.

In the early 1980s, 19-year-old Jordan Belfort — who would go on to become known as the Wolf of Wall Street, a title he bestowed on himself in a tell-all memoir — had a fortuitous encounter on Jones Beach, on Long Island, with another teenager selling ice cream named Stephen Drescher.

The two became friends. Prosecutors would later note their shared hustling spirit, a drive for entrepreneurialism that curdled into a drive for grift. Within a few years, Mr. Belfort started building a pump-and-dump stock-scam empire. He took Mr. Drescher under his wing as he built a boiler room brokerage that would go on to defraud more than 1,000 investors, later memorialized in Martin Scorsese’s box office hit “The Wolf of Wall Street.”

Mr. Belfort’s enterprise collapsed in the late 1990s, when he was arrested and pleaded guilty to fraud and money laundering. Mr. Drescher went down not long after, convicted of securities fraud and sent to federal prison for nearly four years.

He, too, had a spiritual successor of sorts: his stepson Ryan Sasson.

Bronzed, athletic and self-assured, Mr. Sasson is chief executive of Strategic Financial Solutions, a large employer in Buffalo often hailed by politicians and business publications as a fast-growing exemplar of corporate citizenship. Its call center, packed at its peak with hundreds of workers, offers well-paying jobs in a region eager for economic expansion. Strategic regularly makes four- and five-figure philanthropic donations to local causes; New York’s lieutenant governor cut the ribbon at its Buffalo office opening. On its website, the company, which also has a Manhattan office, boasts of luxe perks like massage therapy rooms and bonus trips.

The company’s primary business is debt settlement, helping consumers buried in credit card bills negotiate down what they owe and extract themselves from financial turmoil. Strategic has more than 75,000 clients and has saved them $1 billion over the last three years through its negotiated debt deals, the company’s president said in January in a legal filing.

But state and federal prosecutors, former clients and former employees cast Strategic in a very different light.

The company’s business is predatory, they say, and uses a nationwide network of accomplice law firms to exploit clients — many of them struggling, low-income people — and extract fees that often total tens of thousands of dollars for services that can sometimes leave customers financially worse off than when they started. Clients think that they’re paying those fees to law firms to represent them in the high-risk process of debt settlement. Instead, the clients are funneled mainly toward workers with no legal training, and frequently find themselves unrepresented in legal proceedings.

Some manage to get the debt relief they seek, but others are left with tattered credit scores and legal judgments against them that have led to wage garnishments and debts even larger than when they started.

In January, government regulators pounced.

After an investigation that started more than four years ago, the Consumer Financial Protection Bureau — along with the attorneys general of New York, Colorado, Delaware, Illinois, Minnesota, North Carolina and Wisconsin — sued Strategic and its operators, including Mr. Sasson, on civil fraud charges. They asked a Federal District Court judge in Buffalo to immediately freeze the company’s assets and hand over its operations to a receiver. Citing the case’s strength — the government prosecutors are “likely to prevail on the merits of this action,” the judge wrote — he granted their request within 24 hours.

Strategic has asked the court to reverse that decision. “We continue to believe this case is really targeting the law firms,” said Dennis Vacco, a lawyer representing Strategic. “They don’t have authority over the law firms so they are squeezing their administrative service provider.”

Strategic took in hundreds of millions of dollars in fees from clients in the last seven years, according to the regulators’ January complaint. The company transferred at least $72 million to private companies controlled by Mr. Sasson and his business partners, prosecutors said. Another $36 million flowed from the network of Strategic-affiliated law firms to the private family trust of Mr. Sasson’s longtime business associate, Jason Blust.

As federal regulators closed in on his business, a yacht Mr. Sasson co-owns went up for sale: the $2.6 million “Strategic Dreams.”

Former clients highlight the financial and psychological toll that the program took on them. More than 40 percent drop out before their debts are resolved, according to Strategic’s own legal filings. In one-third of the client cases examined by the suing regulators, customers paid Strategic’s affiliated law firms but never received any debt relief. In other cases, the debts eliminated were eclipsed by the fees they paid.

Americans have a lot of debt — to the tune of $1.1 trillion on credit cards — and there’s a huge business in helping people manage it. Many of those debt holders say they feel like they’re drowning. When they’re promised help, they don’t necessarily ask questions about what they’re paying for, and why.

The Cockroach Theory

Mr. Sasson, who is 45, was born in New York City to Ginjer and Joseph Sasson, who divorced when he was young. His mother, who died 11 years ago, was introduced by Mr. Belfort to Mr. Drescher.

After college at Tulane University, Mr. Sasson worked on a retail clothing venture. His post-college career played out amid his stepfather’s trial, 2001 conviction and imprisonment for securities fraud.

Mr. Drescher’s crimes involved manipulating the market prices of small companies’ initial public offerings. The trades netted millions for Mr. Drescher’s employer, the now defunct brokerage Monroe Parker Securities, and earned him six-figure bonuses. The family lived large, with tens of thousands of dollars in limousine charges, according to court records, often for travel to the family’s $70,000-a-summer Hamptons rental.

The sprawling scheme’s many participants included the shoe designer Steve Madden, who pleaded guilty to stock fraud. Mr. Drescher’s indictment details events that seem drawn from a caper movie, like the hours he and an accomplice spent buying gambling chips at Caesars Palace and the Mirage in Las Vegas in what prosectors said was a scheme to launder illicit cash.

The casino move was one of many tactics Mr. Drescher learned from his infamous mentor, government lawyers claimed. “What Belfort taught Drescher was enough to give him a Ph.D. in securities fraud,” William Johnson, a prosecutor for the U.S. attorney for the Southern District of New York, told the jury during Mr. Drescher’s trial.

Prosecutors also introduced to the courtroom a notion that Mr. Belfort had often discussed with colleagues, called “the cockroach theory.”

“When the regulators would squash a firm, sort of like stepping on a firm, all the roaches would scatter,” one of Mr. Drescher’s associates, Bryan Herman, said in his testimony. “So when the regulators would squash a penny stock firm, the brokers would scatter and then reappear in other firms somewhere else.”

In 2006, the same year his stepfather left prison, Mr. Sasson set up the company that became an anchor for some of his many enterprises over the next decade: Timberline Capital, which made short-term loans to retailers. Mr. Sasson invested in dry cleaners and restaurants, including My Belly’s Playlist, a sandwich shop that was sued for wage theft and settled. (In many of his pursuits, he found himself entangled in lawsuits.)

Debt settlement was a market that Mr. Sasson gravitated toward early and returned to repeatedly. It is also where his own business dealings intersected with those of his stepfather, Mr. Drescher, who had been disbarred and stripped of his broker’s license. (Mr. Drescher did not respond to a request for comment.)

“I am deeply offended that you attempt to tar me with the personal history of my stepfather, who married my mother when I was a teenager,” Mr. Sasson told The New York Times. “If you want to know the biggest influences on my life, you can start with my parents. They are of strong character and values, which I like to believe they instilled in me.”

In 2009, both men were named in one complaint in a handful of lawsuits against Elimadebt. This was a company managed by Mr. Sasson that used a business model he later incorporated into Strategic’s: handling sales for debt settlement lawyers. The lawsuits, filed by a disgruntled partner law firm, accused the company of contract violations.

Federal court filings in Miami by the angry business partner described Mr. Sasson as a “straw man” for his stepfather. Elimadebt ceased operations soon after the lawsuit was settled in 2011. (Lawyers representing Strategic and Mr. Sasson called the straw-man allegation “completely false.”)

Mr. Sasson had by then moved on to a new company, Legal Helpers Debt Resolution, which was sued by four state attorneys general for defrauding consumers by charging hefty upfront fees, then doing very little to negotiate down the consumers’ debts. (Mr. Drescher and Mr. Sasson’s mother were also tangentially involved. They ran a services business that did work for Legal Helpers.) To settle those lawsuits, Legal Helpers and some of its leaders agreed, over several years, to pay more than $14 million in penalties and consumer restitution and to cease operations, according to government prosecutors’ legal filings.

Mr. Sasson was not personally named as a defendant in the Legal Helpers lawsuits.

Legal Helpers started winding down its business in 2012. That’s the same year that Strategic appeared to start operating, though it lists its founding date as 2007.

“If you look back at the detritus of Legal Helpers after it was dismantled, the same names show up,” said Lucy Prather, an attorney for the City of Chicago, which filed suit in 2022 against Strategic and an affiliated law firm.

Strategic would become the biggest moneymaker of Mr. Sasson’s career.

A High-Stakes Game of Chicken

Christopher Elkins, 49, has been cited by Strategic as a success story.

Mr. Elkins enrolled with Canyon Legal Group, a Strategic affiliate, in 2019, after receiving a mailed advertisement. He dropped out of the program in late 2023. In those four years, he had debts totaling $85,000 settled for $42,000. He paid $26,000 in fees to Canyon, leaving him with a net savings of $17,000. Had his debt lingered, his interest alone — 28 percent or higher on each of his credit cards — would, in just one year, have eclipsed what he paid Canyon in fees.

But Mr. Elkins found the experience of working with the company miserable. By around the 20-month mark, he recalled, he had paid some $20,000 to have only a few relatively small debts resolved, and his credit score had nose-dived from around 740 to 520. In the following months, he faced four lawsuits from creditors; Canyon represented him in at least two, according to Strategic’s legal filings. As he tried to reach an attorney, he was continually directed to customer service.

Mr. Elkins fired Canyon. He said he and his wife then, on their own, negotiated settlements to all four of the lawsuits.

“They are vultures,” Mr. Elkins said in an interview to The New York Times. “They are preying on people who find themselves in dire need of support.”

Rick Gustafson, a lawyer who runs Canyon, said that “at trial, Mr. Elkins testified that he was ‘drowning’ in debt before he retained Canyon,” adding, “Thanks to Canyon, he is no longer drowning.”

Consumers typically heard about Strategic through advertisements — the company sent some 2 million direct mail solicitations a week — that told them they had prequalified for a low-interest loan. When they called to find out more, sales representatives often told them they weren’t actually eligible for a loan, but encouraged them to instead enroll, through one of Strategic’s partner law firms, in the debt settlement program.

Debt settlement is essentially a high-stakes game of chicken. The first thing companies tell their clients to do is stop paying their monthly debt bill. Instead, the client puts money each month into an escrow account — generally less than they would have owed for their credit cards’ minimum payments. The goal is to force the debt into default.

Once a customer fails to pay for an extended period, many creditors will write off the loan as a soured debt and sell it to a collection firm for pennies on the dollar. That’s the sweet spot for settlement: The new buyer will usually accept far less than the debt’s face value. Debt settlement negotiators use the funds their client has stashed away in escrow to pay off the reduced debt. A $30,000 credit card bill, for example, might get settled for $15,000 or less.

The maneuver causes significant collateral damage to the client. Customers’ credit scores plunge once they stop paying their bills, and many creditors will sue to pursue what they’re owed. (Strategic warns potential clients that this is part of the process.)

At that point, clients need to have lawyers who are responsive to incoming lawsuits if they want to avoid default judgments, which typically seek the debtor’s full owed tab plus additional fees. Some settlement companies make it clear that they will not provide legal aid. If a client gets sued, they refer the client to outside lawyers or tell them to go find their own.

Strategic, though, makes its legal help the centerpiece of its pitch. Sales employees’ scripts, according to a legal filing by the receiver now controlling the company, instructed them to tell prospects that they would be connected to an “established law firm that specializes in helping clients resolve their own personal debt.”

What that arrangement allowed Strategic to do is to begin billing right away. Under federal and many state laws, debt-settlement companies generally cannot charge clients until they actually deliver a settlement deal. But attorneys can.

It’s enticing for clients who are drowning in debt to feel like they can pay, albeit heavily, for a legal team to guide them through the process of negotiating down their debts.

But that’s not exactly what they’re getting, according to interviews with former employees and clients, as well as legal filings from prosectors. Cases are handed over to negotiators with no legal training. The lawyers don’t even consistently show up for the clients in court, though Strategic-affiliated firms say that they do sign off on final settlements.

By the time clients are halfway through the program, some have paid tens of thousands to Strategic and face lawsuits from creditors — with very little of their debt resolved.

“No system operated by a human being is going to be perfect, but we aimed for perfection,” Mr. Sasson said in an email. “We have helped more than 100,000 people over the years get back on their feet by saving them a lot of money. That is the definition of consumer protection.”

A Network of Law Firms

Strategic relies on a network of at least 20 law firms, which take on an average of 5,000 to 10,000 clients each — extremely high loads for firms that generally had five to 20 employees.

Mr. Blust, who worked with Mr. Sasson at Legal Helpers, oversees this network of firms. Mr. Blust’s firms keep roughly 20 percent of client fees, and the other 80 percent go to Strategic, emails filed in court show.

“With the exception of Pioneer (a law firm that hasn’t taken a new client in many years), the law firms Blust consults with (including those in this case) are owned and independently operated by the attorney owners,” said Rodney Personius, an attorney for Mr. Blust.

The lawyers who own these firms take on risks. One lawyer, Daniel Rufty, a recent law school graduate from a for-profit and now-shuttered school, paid $10 for ownership of a Strategic-affiliated firm — then, months into his tenure, found out he was under investigation by his state’s bar association for misleading clients and “criminal debt adjusting.”

Mr. Rufty was suspended from the practice of law for five years. He declined to comment through his lawyer. Strategic emerged unscathed.

Strategic’s complicated structure has come under legal scrutiny before. In 2020 — after lawyers in Florida sued Strategic and accused it of skirting the law by portraying its own employees as law firm workers — debt negotiators were abruptly reclassified by Strategic as employees of the law firms instead of Strategic or its subsidiaries. (The Florida case was settled, on undisclosed terms.)

But current and former employees, and legal filings from Strategic’s receiver, said that the new arrangement was largely illusory. While the negotiators now technically worked for the law firms, they still reported to Strategic staff. The negotiators used Strategic’s systems and in some cases, when they weren’t remote, worked from Strategic’s offices, according to interviews with former negotiators and legal filings. Some said they didn’t know the names of the people who operated the firms and were supposedly their bosses.

Lawyers for Strategic and its affiliated law firms have insisted, in court filings and in interviews, that the arrangement is valid and transparent.

“The firms’ attorneys are involved in every settlement,” said Terrence Connors, a lawyer representing the firms.

‘To Have No Money for a Week Was Terrifying’

When Anne Barsch, 48, first learned about a Strategic-affiliated law firm, Monarch Legal Group, she felt a wave of relief. She had roughly $60,000 in debt from making home improvements and supporting her young children. She thought Monarch could negotiate down those debts and represent her when creditors sued. She and her husband agreed to pay $818 monthly into an escrow account for the program.

Ms. Barsch said in interviews, and testified at the trial in Buffalo, that she lost trust in Monarch when she learned that a judgment had been entered against her by a creditor — after she’d stopped paying bills, at the firm’s instruction — and her lawyer hadn’t shown up in court to represent her. Her bank account was frozen for a week.

“To have no money for a week was terrifying,” she recalled, adding that she then started reading about Monarch online and learned the firm was being sued by the City of Chicago.

She sent letters to her creditors saying she had been “scammed” and asking to negotiate with them on her own. She learned that Monarch had sent lawyers to represent her for just 30 percent of her court dates, according to her testimony.

A spokesman for the law firms said they settled six of Ms. Barsch’s 10 debts. Ms. Barsch said they settled two, and she and her husband did the others on their own.

Another Monarch client, Julia Briggs, 43, who had been sued by a creditor, showed up at her own court date and discovered that no attorney had come to represent her. Leading up to the hearing, she said in interviews, she was told she couldn’t get her attorney’s direct contact information, leaving her to wonder: What exactly were all her legal fees going toward? She then reached out to a new lawyer, Scott Priz, to file suit against Strategic in 2022.

A spokesman for the law firms said Ms. Briggs signed up for a 24-month program and left roughly halfway through.

While customers like Ms. Briggs and Ms. Barsch said they were unfairly served by the firms, the federal prosecutors’ case rests on a narrower legal issue.

Debt collection laws are a patchwork mostly governed by state statutes. But a federal law requires debt settlement companies that promote their services by phone to close the deal for legal services in person, through a face-to-face meeting with the customer.

Rather than sending sales representatives, Strategic, on behalf of its affiliated law firms, hired gig worker notaries — who effectively came into each meeting cold — to handle those meetings and finalize paperwork. The crux of the government’s case hinges on whether those notaries qualified as sales representatives of the law firms.

A Lavish Corporate Culture

When Ben Kopp, 35, started at Strategic in 2018, the job at first seemed like run-of-the-mill sales. He made 150 to 200 calls a day, seated among rows of other headset-wearing salespeople, pitching customers on the debt settlement program.

But just hours into his employment, Mr. Kopp was cautioned not to tell customers that he was calling from Strategic and to instead say he was calling from one of the law firms associated with Strategic, or from one of the law firms’ support organizations. He recalled looking across the table and catching another new hire’s gaze.

“We kind of met eyes and were like, ‘All right, what did we get hired to do?’” he said. “‘Why wouldn’t we tell them what we’re calling from?’”

Many of the salespeople who worked at Strategic believed, at least in their early months at the company, the clients were actually getting good legal representation, Mr. Kopp said. He had a clearer view into what was happening because he had a college friend who worked on Strategic’s negotiations team.

After a few months, he began searching for a way out, realizing that many customers felt they were being exploited. “It affected me from a moral perspective,” he said.

Some of his colleagues also came to realize — over break room conversations with colleagues in customer service — the potential harms of the program. He heard one sales consultant announce proudly to her teammates that she had enrolled her mother in Strategic’s program. Many in earshot were alarmed, he recalled. “We couldn’t come out and say, ‘Don’t do that’ but we were trying to hint toward, ‘Why would you do that?’”

Still, there were perks. The money clients paid fueled a corporate culture with lavish touches. High performers were presented with Rolex watches and steakhouse dinners. The top salespeople were flown to Las Vegas. Office parties featured beer kegs; celebrations were held at restaurants, with cocktails and D.J. music.

Mr. Sasson’s business, at its prepandemic height, was bringing in tens of millions of dollars each year, according to former employees and legal filings from prosectors.

In 2017, the company sold itself to its employees, through a financial transaction known as an ESOP (Employee Stock Ownership Plan). The deal valued the company at $242 million. Mr. Sasson described the transaction as something of a gift to the employees — “our Strategic family,” he called them — who had built the company.

Mr. Sasson had, effectively, cashed out. His employees now owed 100 percent of Strategic.

A Surprise Federal Lawsuit

On Friday, Jan. 12, in the middle of the afternoon, Strategic’s nearly 1,000 employees — all working remotely, as the staff typically did on Fridays — were abruptly shut out of their company systems. Some were cut off right in the middle of calls with customers.

Three days later, workers learned over group chats with managers that there had been a lawsuit filed against the company. They were told they’d be put on paid leave while the company’s lawyers fought back. On Friday, Jan. 19, the federal court in Buffalo unsealed the regulators’ complaint.

Former employees said they had been drawn to the firm because of its pitch about helping struggling people get back on their feet.

“It’s that fantasy job that you see in television and movies — like at the beginning of ‘The Wolf of Wall Street,’” said David Briggs, who worked as a litigation negotiator for Strategic until 2022, and did not know about Mr. Sasson’s family connection to Jordan Belfort when he drew the comparison. “They really kept you hyped up; they kept you feeling like you were part of a family, a team, and that you were doing good in the world.”

The fate of Strategic — and its work force — is now in the hands of the federal court. If the company remains in receivership, it will soon be out of business, Strategic’s lawyers have told the court.

And the ESOP — the vehicle that turned over ownership of Strategic to the company’s employees — will be wiped out if Strategic folds. Mr. Briggs’s shares were valued on his last statement at $6,090. He anticipates that by his next statement, that number may fall to zero.

Kitty Bennett and Kirsten Noyes contributed research.