Three officials of a Miami Beach-based company are accused of using the names of familiar, but bankrupt retail chains to defraud investors out of nearly $112 million.
In a complaint filed in U.S. District Court in Miami, the Securities and Exchange Commission on Thursday charged co-founders of Retail Ecommerce Ventures LLC with carrying out fraudulent securities offerings, misusing investor funds and making Ponzi-like payments to investors.
According to the SEC complaint, the company’s primary business was to purchase distressed but recognizable retail companies and convert them into online-only operations.
Hundreds of investors put up approximately $112 million thinking they were funding a return to the marketplace of eight companies with updated names, the SEC said. Those companies, the complaint states, included Pier 1 Imports Online Inc., Stein Mart Online LLC, Linens ‘N Things Online Inc., RadioShack Online LLC, Franklin Mint Online LLC, Modell’s Sporting Goods Online Inc., Dress Barn Online LLC, and Brahms LLC.
Seven of the companies currently sell merchandise online under ownership of creditors who took control of Retail Ecommerce Ventures’ assets in 2023.
The SEC’s complaint alleges that prior to that, between April 2020 and November 2022, Retail Ecommerce Ventures co-founders Taino Lopez and Alexander Mehr and its chief operating officer Maya Burkenroad sold unsecured notes that promised profits of up to 25% a year and a monthly dividend as high as 2.1%.
A story in the New York Post identified Mehr and Lopez as “a pair of flashy e-commerce entrepreneurs” who made “high-profile deals.”
Efforts to reach company officials were unsuccessful. The only three companies registered by Lopez and Mehr with the Florida Division of Corporations are listed as inactive and the U.S. District Court’s website does not yet list any defense attorneys in the case.
The defendants told investors that their money would be used to acquire the defunct predecessors to their portfolio companies and raise operating capital to reestablish them in the marketplace, the complaint states.
They assured investors that funds raised for a specific company would only be used for that company, and that REV and its brands had never failed to pay a single investor, the complaint says, adding that while some of the portfolio brands generated revenue, none generated any profits.
In addition, the SEC complaint alleges that the defendants transferred at least $5.9 million in investor proceeds between the portfolio brands. At least $5.9 million that was distributed to investors were in fact “Ponzi-like” payments funded by other investors, and $16.1 million in investor funds were misappropriated for the personal use of Lopez and Mehr, the complaint alleges.
The three founders were each charged with violations of securities and exchange acts. The SEC complaint seeks permanent injunctions, civil penalties, and orders prohibiting the defendants from serving as officers or directors of other investment companies. It also seeks disgorgement and prejudgment interest from Lopez and Mahr.
Several of the retail brands exist online today. In December 2023, the assets of Retail Ecommerce Ventures were purchased by a group of secured creditors and reassigned to a new unrelated company, Omni Retail Enterprises LLC, the complaint said.
Ron Hurtibise covers business and consumer issues for the South Florida Sun Sentinel. He can be reached by phone at 954-356-4071 or by email at rhurtibise@sunsentinel.com.