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

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…