Owners of Radio Shack, Pier 1 Imports and other brands accused of running $112 million Ponzi scheme
MGN
A pair of e-commerce entrepreneurs who bought a number of well-known retail brands — including RadioShack, Modell’s Sporting Goods and Pier 1 Imports — out of bankruptcy are accused of running a Ponzi scheme.
The Securities and Exchange Commission on Monday accused Alex Mehr and Tai Lopez, founders of the Miami-based Retail Ecommerce Ventures (REV), of defrauding investors out of approximately $112 million.
Through their holding company, Mehr and Lopez acquired distressed brick-and-mortar companies in order to turn them into successful, online-only brands. Dress Barn and Linens ‘n Things were also among their acquisitions.
REV acquired RadioShack in 2020, three years after the nearly century-old electronics chain filed for its second bankruptcy. RadioShack first filed for Chapter 11 protection in 2015.
Modell’s Sporting Goods filed for bankruptcy in March 2020, during which time it also announced it would be closing all of its stores. REV bought the Modell’s brand name and assets in August 2020. Pier 1 Imports — which still exists as an online store — declared bankruptcy in early 2020. REV acquired its trademark name and assets later that same year.
The SEC’s suit alleges that between 2020 and 2022, Mehr and Lopez, “made material misrepresentations” to hundreds of investors about the bankrupt retailers they had acquired. For example, to entice individuals to invest in their acquisitions, they said their portfolio companies were “on fire” and that “cash flow is strong.” They also told prospective backers that money raised for a company would only be used for that specific firm. That proved not to be the case, according to the SEC’s lawsuit, which was filed Monday in the U.S. District Court for the Southern District of Florida.
“Contrary to these representations, while some of the REV Retailer Brands generated revenue, none generated any profits,” the suit states. “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.”
Neither Mehr nor Lopez immediately responded to CBS News’ request for comment.
The SEC alleges that at least $5.9 million of returns paid to investors were actually Ponzi-like payments funded by other investors, as opposed to companies’ profits.
Additionally, the federal regulatory agency claims that Mehr and Lopez allocated $16 million worth of investments for their own use, according to the filing.
