Key Takeaways
- Alex Mehr and Tai Lopez, owners of Retail Ecommerce Ventures (REV), are accused by the SEC of running a $112 million Ponzi scheme involving bankrupt retail chains like RadioShack and Pier 1 Imports.
- The lawsuit claims they misled investors by stating their acquisitions were thriving and that funds would be used solely for specific firms.
- Despite generating revenue, none of the REV Retailer Brands were profitable, leading to the use of new investments to pay returns to earlier investors, a hallmark of a Ponzi scheme.
- Mehr and Lopez allegedly pocketed $16.1 million from the investments.
- The accusations were reported by CBS News.
Two entrepreneurs who bought a number of well-known bankrupt retail chains, such as RadioShack, Pier 1 Imports, and Modell’s Sporting Goods, have been accused of operating a $112 million Ponzi scheme.
In a lawsuit filed by the Securities and Exchange Commission, Alex Mehr and Tai Lopez have been accused of deceiving hundreds of investors about the aforementioned retailers acquired through their company Retail Ecommerce Ventures (REV), as reported by CBS News.
RadioShack was acquired by REV in 2020 after filing for bankruptcy for a second time. REV bought Modell's Sporting Goods that same year, five months after declaring for bankruptcy. Pier 1 Imports was also purchased in 2020.
Dress Barn, Stein Mart, and Linens 'n Things were also bought by REV. The company's goal was to turn these acquisitions into successful online-only shops.
Between 2020 and 2022, Mehr and Lopez allegedly "made material misrepresentations" in order to attract investors, claiming their acquisitions were "on fire" and that "cash flow is strong." The pair are also accused of lying to potential backers who were told that the money raised for their companies would be solely allocated towards that specific firm.
"Contrary to these representations, while some of the REV Retailer Brands generated revenue, none generated any profits," the lawsuit reads. "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 in returns paid to investors were actually Ponzi-like payments funded by other investors, the SEC alleges.
Mehr and Lopez allegedly pocketed $16.1 million in investments.
