Buyers of RadioShack Accused of Running $112 Million Ponzi Scheme
The Securities and Exchange Commission on Monday accused Alex Mehr and Tai Lopez, founders of Retail Ecommerce Ventures (REV), of running a massive Ponzi scheme that defrauded investors out of approximately $112 million. The pair, who acquired several well-known retail brands including RadioShack, Modell's Sporting Goods, and Pier 1 Imports out of bankruptcy, allegedly made material misrepresentations to hundreds of investors about the financial health of their portfolio companies.
According to a report by CBS News, Mehr and Lopez claimed that their acquisitions were "on fire" and had "strong cash flow," in order to entice individuals to invest. However, the SEC's suit alleges that this was not the case, and that money raised for one company was often used to fund other ventures.
The scheme is believed to have taken place between 2020 and 2022, during which time Mehr and Lopez acquired several distressed brick-and-mortar companies with the intention of turning them into successful online-only brands. In addition to RadioShack, Modell's Sporting Goods, and Pier 1 Imports, Dress Barn and Linens 'n Things were also among their acquisitions.
"This is a classic example of a Ponzi scheme," said an SEC spokesperson. "The defendants made false promises to investors in order to secure funding for their own ventures, rather than using the money as intended."
The alleged scheme has significant implications for the retail industry, which has been struggling to adapt to changing consumer habits and the rise of e-commerce. The acquisition of distressed brands by REV was seen as a savvy move by some analysts, who believed that the company's online expertise could help turn around struggling retailers.
However, the SEC's allegations suggest that Mehr and Lopez may have prioritized their own interests over those of their investors. "It's a betrayal of trust," said one investor, who wished to remain anonymous. "We invested in these companies because we believed in their potential, but it turns out we were just being used as pawns in a larger game."
The SEC's suit seeks to recover the $112 million allegedly lost by investors and to hold Mehr and Lopez accountable for their actions.
As the investigation continues, REV has released a statement denying any wrongdoing. "We are confident that our business practices have always been transparent and above board," said a spokesperson for the company.
The case is set to be heard in court later this year, where it will be up to a judge to determine whether Mehr and Lopez's actions constitute a Ponzi scheme.
*Reporting by Yro.*
