The Securities and Alternate Fee (SEC) is accusing the lads who purchased bankrupt chains RadioShack, Modell’s Sporting Items, and Pier 1 Imports of operating a Ponzi scheme that duped traders out of tens of tens of millions of {dollars}.
A grievance filed within the U.S. District Court docket for the Southern District of Florida on Tuesday, alleges the co-founders of Miami-based Retail Ecommerce Ventures, Alex Mehr and Tai Lopez, along with the corporate’s Chief Working Officer Maya Burkenroad, raised roughly $112 million mixed from lots of of U.S. traders by promoting investments in eight firms they created and managed below Retail Ecommerce Ventures.
Between April 2020 by Nov. 2022, they raised cash by promoting two kinds of investments. They bought unsecured notes that promised returns of as much as 25% a 12 months, and possession shares that supplied month-to-month payouts as excessive as 2%, based on the grievance.
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A homeless man sleeps in entrance of a closed Pier 1 Imports retailer on Hollywood Boulevard on July 16, 2020, in Hollywood, California. (Frederic J. Brown/AFP through / Getty Photos)
Additionally they claimed that the cash could be used to purchase struggling retail manufacturers and to fund operations, however the SEC alleges Mehr and Lopez misled traders about how nicely the companies had been truly doing.
The grievance cited not less than one promotional video, publicly out there on the web, the place Lopez touted REV’s strategy as “one of the best strategies you can invest in.” The SEC additionally mentioned that she and Lopez additional assured traders that whereas different companies had been struggling, their portfolio firms had been “on fire” and that “cash flow is strong.”
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A person walks previous a RadioShack storefront within the Chelsea neighborhood, March 9, 2017, in New York Metropolis. (Drew Angerer / Getty Photos)
They assured traders that funds raised for a particular portfolio firm could be used for that particular firm, and that REV and the REV Retailer Manufacturers have by no means did not pay a single investor, the grievance continued. Nevertheless, the SEC mentioned that whereas a few of the REV Retailer Manufacturers generated income, none of them generated any earnings.
To pay curiosity, dividends and maturing observe funds, Mehr and Lopez resorted to utilizing a mix of loans from outdoors lenders, service provider money advances, cash raised from new and present traders, and transfers from different portfolio firms to cowl obligations, the SEC mentioned.
A closed Pier 1 Imports retailer in Fairfax, Virginia, on Could 21, 2020. (Andrew Harrer/Bloomberg through / Getty Photos)
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No less than $5.9 million of the returns distributed to traders had been “Ponzi-like payments funded by other investors,” the grievance mentioned. Mehr and Lopez had been additionally accused of misappropriating roughly $16.1 million in investor funds for “their personal use.”
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In complete, REV and its associated firms, together with Costume Barn, Linen ‘N Things, Modell’s, Pier 1 and RadioShack, raised about $112 million from traders. After they defaulted, collectors took the manufacturers and bought them off to a brand new firm, Omni Retail Enterprises, LLC.
