California Corporations Code Section 25118(b) provides an exemption from the state's usury limitations for loans.  The exemption is subject to several conditions.  One condition is the existence of either a preexisting relationship or a level of financial sophistication:

• The lender and either the issuer of the indebtedness or the guarantor, as the case may be, or any of their respective officers, directors, or controlling persons, or, if any party is a limited liability company, the managers as appointed or elected by the members, have a preexisting personal or business relationship.
• The lender and the issuer, or the lender and the guarantor, by reason of their own business and financial experience or that of their professional advisers, could reasonably be assumed to have the capacity to protect their own interests in connection with the transaction.

Cal. Corp. Code § 25118(f).  In Neary v. Global Gold Exchange, LLC,  2024 WL 941582 (Mar. 5, 20240, the plaintiff was misled into loaning several million dollars to a money laundering front for the Mexican Cartel.  U.S. Magistrate Judge Lisette M. Reid ruled that the borrower and its managing members could be reasonably assumed to have the capacity to protect its own interests because "were sophisticated enough to veil themselves with a legitimate business model that would solicit a businessperson into mistakenly loaning money to the Mexican Cartel."

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