Two entrepreneurs behind acquisitions of well-known brands like RadioShack and Pier 1 Imports are now facing allegations of running a Ponzi scheme.
The Securities and Exchange Commission (SEC) filed a complaint in a Florida federal court on Tuesday, Sept. 22, against Alex Mehr and Taino Lopez. The co-founders of Retail Ecommerce Ventures (REV) are accused of defrauding investors of roughly $112 million between 2020 and 2022, CBS News reported.
According to a federal complaint obtained by PEOPLE, “REV’s primary business was identifying distressed companies with name brand recognition, raising funds from investors in order to purchase the brand’s assets, and converting them into successful -e-commerce-only businesses.”
Some of the other companies they acquired include Modell’s Sporting Goods, Dress Barn, and Linens ‘n Things.
The SEC’s complaint alleges that Mehr and Lopez “made material misrepresentations” to attract investors, promoting “REV’s approach as ‘one of the best strategies you can invest in.’” The defendants reportedly assured investors that while other businesses were struggling, their portfolio companies were “on fire” and that “cash flow is strong.”
However, the SEC states that none of the portfolio companies actually generated profits. The complaint further claims that to cover financial shortfalls, 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 asserts that “at least $5.9 million of the returns distributed to investors were, in reality, Ponzi-like payments funded by other investors.”
Additionally, the complaint alleges that the two men diverted $16.1 million in investor funds for their personal use. REV’s Chief Operating Officer, Maya Burkenroad, is also named in the complaint.
The SEC is seeking civil monetary penalties, disgorgement of ill-gotten gains, and a ban preventing Mehr, Lopez, and Burkenroad from serving as officers or directors of other companies.
