The Securities and Exchange Commission (SEC) is accusing the men who bought bankrupt chains RadioShack, Modell’s Sporting Goods, and Pier 1 Imports of running a Ponzi scheme that duped investors out of tens of millions of dollars.
A complaint filed in the U.S. District Court for the Southern District of Florida on Tuesday, alleges the co-founders of Miami-based Retail Ecommerce Ventures, Alex Mehr and Tai Lopez, together with the company’s Chief Operating Officer Maya Burkenroad, raised approximately $112 million combined from hundreds of U.S. investors by selling investments in eight companies they created and controlled under Retail Ecommerce Ventures.
Between April 2020 through Nov. 2022, they raised money by selling two types of investments. They sold unsecured notes that promised returns of up to 25% a year, and ownership shares that offered monthly payouts as high as 2%, according to the complaint.
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They also claimed that the money would be used to buy struggling retail brands and to fund operations, but the SEC alleges Mehr and Lopez misled investors about how well the businesses were actually doing.
The complaint cited at least one promotional video, publicly available on the internet, where Lopez touted REV’s approach as “one of the best strategies you can invest in.” The SEC also said that she and Lopez further assured investors that while other businesses were struggling, their portfolio companies were “on fire” and that “cash flow is strong.”
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They assured investors that funds raised for a specific portfolio company would be used for that specific company, and that REV and the REV Retailer Brands have never failed to pay a single investor, the complaint continued. However, the SEC said that while some of the REV Retailer Brands generated revenue, none of them generated any profits.
To pay interest, dividends and maturing note payments, Mehr and Lopez resorted to using a combination of loans from outside lenders, merchant cash advances, money raised from new and existing investors, and transfers from other portfolio companies to cover obligations, the SEC said.
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At least $5.9 million of the returns distributed to investors were “Ponzi-like payments funded by other investors,” the complaint said. Mehr and Lopez were also accused of misappropriating approximately $16.1 million in investor funds for “their personal use.”
In total, REV and its related companies, including Dress Barn, Linen ‘N Things, Modell’s, Pier 1 and RadioShack, raised about $112 million from investors. When they defaulted, creditors took the brands and sold them off to a new company, Omni Retail Enterprises, LLC.
