SEC: Three individuals utilized defunct brands to raise $112 million

Investors put forward a staggering $112 million to support the online revival of well-known businesses like RadioShack and Pier 1 Imports, only to be embroiled in a fraudulent investment scheme, according to the U.S. Securities and Exchange Commission (SEC). The lawsuit filed this week accuses a trio of Miami Beach executives of Retail Ecommerce Ventures LLC of using bankrupt retail brands to deceive and cheat investors out of millions of dollars.

The SEC complaint lodged at the U.S. District Court in Miami alleges that the company’s co-founders engaged in misleading securities offerings, misusing investor funds, and making payments akin to a Ponzi scheme. The central focus of Retail Ecommerce Ventures LLC was acquiring struggling retail companies with recognizable names and converting them into online enterprises.

A multitude of investors contributed around $112 million under the impression that they were backing the resurgence of eight iconic companies rebranded for online platforms. The brands in question included Pier 1 Imports Online Inc., Stein Mart Online LLC, Linens ‘N Things Online Inc., and others, which were claimed to sell merchandise online, currently operated by creditors who assumed control of Retail Ecommerce Ventures’ assets in 2023.

Allegedly, between April 2020 and November 2022, the Retail Ecommerce Ventures co-founders offered unsecured notes that falsely pledged annual profits of up to 25% and monthly dividends as high as 2.1%. Company heads, Taino Lopez and Alexander Mehr, along with their Chief Operating Officer Maya Burkenroad, touted the idea that investor funds would exclusively support the intended company and guaranteed no default to investors. However, the SEC asserts that not a single one of the brands they acquired managed to turn a profit.

According to the SEC complaint, the accused individuals redirected at least $5.9 million between the different brands, with a portion of investor distribution amounting to $5.9 million constituting “Ponzi-like” payments funded by other investors. Furthermore, $16.1 million of investor funds were reportedly misused for Lopez and Mehr’s personal enrichment.

The lawsuit seeks permanent injunctions, civil penalties, and restrictions on the defendants from serving as officers or directors of investment companies. It also aims for the disgorgement of ill-gotten gains from the accused individuals. Consequently, the assets of Retail Ecommerce Ventures were acquired by a group of secured creditors and transferred to Omni Retail Enterprises LLC in December 2023, postulating a significant shift in ownership.