The Securities and Exchange Commission alleged this week that Retail Ecommerce Ventures, the company that bought RadioShack out of bankruptcy in 2020, ran a Ponzi scheme that defrauded investors out of $112 million.
REV was founded by Taino Lopez and Alexander Mehr and spent recent years buying up distressed retail ventures including Dress Barn, Franklin Mint, Linens ‘N Things, Modell’s Sporting Goods, Pier 1 Imports, RadioShack, and Stein Mart.
Lopez and Mehr allegedly promised investors in their company annualized returns of 25%, along with equity and a monthly preferential dividend as high as 2.083%. They are also accused of assuring investors that funds raised would be for one specific portfolio company, and REV had never failed to pay a single investor. But that wasn’t true, according to the SEC.
According to the court filing on Monday:
Contrary to these representations, while some of the REV Retailer Brands generated revenue, none generated any profits. Consequently, in order to pay interest, dividends and maturing note payments, Defendants 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. At least $5.9 million of the returns distributed to investors were, in reality, Ponzi-like payments funded by other investors.
The SEC alleges that about $16.1 million in investor funds were diverted for personal use by Lopez and Mehr. The 49-year-old Lopez and 46-year-old Mehr both lived in Puerto Rico, according to the court filing, though their company was registered in Delaware and their primary place of business was Miami, Florida.
The filing includes dollar amounts raised by REV in the name of each company:
Brahm’s: $12.9 million
Dress Barn: $11.4 million
Franklin Mint: $5.9 million
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