The U.S. Securities and Exchange Commission (SEC) is accusing two entrepreneurs of misusing investor funds, making Ponzi-like payments and conducting a series of fraudulent securities offerings.
A lawsuit was filed by the SEC in the U.S. District Court for the Southern District of Florida against Retail Ecommerce Ventures LLC (REV) co-founders Taino Lopez and Alexander Mehr as well as REV chief operating officer (COO) Maya Burkenroad.
The primary business of REV is to purchase distressed retail companies with name brand recognition and convert them into profitable internet-only businesses.
The REV portfolio of retail brands includes Dress Barn, Modell’s, Pier 1, Stein Mart, Linens ‘N Things, Brahms, and Franklin Mint and allegedly RadioShack, according to the SEC.
Pier 1 and RadioShack were popular brick-and-mortar retail chains listed on the New York Stock Exchange and subsequently filed for bankruptcy protection.
“Lopez and Mehr made material misstatements in connection with these offerings about the success and profitability of REV’s business model and the REV Retailer Brands, as well as the safety of investors’ investments,” wrote senior trial counsel Alise Johnson in the complaint.
"RadioShack’s current owner has no business, legal, financial, or operational ties to these individuals or to REV," the Unicomer Group spokesperson told NTD.
Lopez and Mehr are charged with violating Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934, and Rule 10b-5.Specifically, the SEC alleges that from April 2020 to November 2022, the defendants raised some $112 million from hundreds of investors through fraudulent offerings and sold securities in the form of unsecured notes promising up to 25 percent annualized returns, as well as equity membership units with a monthly preferential dividend as high as 2.083 percent.
Lopez, Mehr, and Burkenhead did not respond to requests for comment about the allegations by the time of publication.
Mehr and Lopez reside in Puerto Rico, while Burkenroad is the cousin of Lopez, according to the complaint. Burkenroad is charged with aiding and abetting the violations.
“Defendants misappropriated approximately $16.1 million in investor funds, which was diverted for Defendants Lopez’s and Mehr’s personal use,” Johnson said.
The complaint further alleges that the defendants transferred some $5.9 million in investor proceeds directly between portfolio companies, which was contrary to written and oral representations made to investors about the use of funds.
The SEC seeks permanent injunctions and civil penalties as well as disgorgement and prejudgment interest.