Buyers of RadioShack Accused of Running $112 Million Ponzi Scheme (cbsnews.com) 30
An anonymous reader quotes a report from CBS News: A pair of e-commerce entrepreneurs who bought a number of well-known retail brands -- including RadioShack, Modell's Sporting Goods and Pier 1 Imports -- out of bankruptcy are accused of running a Ponzi scheme. The Securities and Exchange Commission on Monday accused Alex Mehr and Tai Lopez, founders of the Miami-based Retail Ecommerce Ventures (REV), of defrauding investors out of approximately $112 million. Through their holding company, Mehr and Lopez acquired distressed brick-and-mortar companies in order to turn them into successful, online-only brands. Dress Barn and Linens 'n Things were also among their acquisitions. [...]
The SEC's suit alleges that between 2020 and 2022, Mehr and Lopez, "made material misrepresentations" to hundreds of investors about the bankrupt retailers they had acquired. For example, to entice individuals to invest in their acquisitions, they said their portfolio companies were "on fire" and that "cash flow is strong." They also told prospective backers that money raised for a company would only be invested in that specific firm. That proved not to be the case, according to the SEC's lawsuit, which was filed Monday in the U.S. District Court for the Southern District of Florida.
"Contrary to these representations, while some of the REV Retailer Brands generated revenue, none generated any profits," the suit states. "Consequently, in order to pay interest, dividends and maturing note payments, Defendants 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 alleges that at least $5.9 million of returns paid to investors were actually Ponzi-like payments funded by other investors, as opposed to companies' profits. Additionally, the federal regulatory agency claims that Mehr and Lopez allocated $16 million worth of investments for their own use, according to the filing.
The SEC's suit alleges that between 2020 and 2022, Mehr and Lopez, "made material misrepresentations" to hundreds of investors about the bankrupt retailers they had acquired. For example, to entice individuals to invest in their acquisitions, they said their portfolio companies were "on fire" and that "cash flow is strong." They also told prospective backers that money raised for a company would only be invested in that specific firm. That proved not to be the case, according to the SEC's lawsuit, which was filed Monday in the U.S. District Court for the Southern District of Florida.
"Contrary to these representations, while some of the REV Retailer Brands generated revenue, none generated any profits," the suit states. "Consequently, in order to pay interest, dividends and maturing note payments, Defendants 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 alleges that at least $5.9 million of returns paid to investors were actually Ponzi-like payments funded by other investors, as opposed to companies' profits. Additionally, the federal regulatory agency claims that Mehr and Lopez allocated $16 million worth of investments for their own use, according to the filing.
RadioShack (Score:5, Insightful)
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Eh, at least one of the ones near here kinda caught a clue before the end and had a shelf of Arduino stuff, but I think by then it was too little, too late. They had already spent too many years trying too hard to force an unnatural pivot to being primarily a cellphone retailer, which just didn't work out as a primary business plan because most people just by phones from their carrier, and the biggest carriers put huge roadblocks in the way of anyone wanting to sign on with a phone bought from a 3rd party.
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At Radio Shack, you've got Questions, We've got cellphones.
Agreed. They did a lot better with retired engineers and college kids majoring in EE.
Re:RadioShack (Score:5, Insightful)
Another victim of the MBA Disease. IIRC in the latter years of Radio Shack and Bed Bath & Beyond no one in the executive suites had actually ever worked the sales floor in their lives, they had no idea what the people who actually made money for the company did. Managed to death, just like Sears, Kmart, and JC Penny.
RadioShack was an shifty cell phone store at that (Score:2)
RadioShack was an shifty cell phone store at that point way to late
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Radio Shack was a candy store when I was a kid. I built all kinds of electronic gizmos and gadgets. My favorite DIP chip was the LM3909. I saved up for an entire summer back in '82 when I was 14 years old so I could purchase a TRS-80 Pocket Computer 2. Man I programmed the heck out of that thing. I knew Radio Shack was in trouble when the store employees started knowing very little to nothing about electronics.
Re:RadioShack (Score:5, Interesting)
It was also a library of anything electronic. You could get books on everything... and starting out for basics, there were those 100 in one boards that one could make circuits with, so you learned what a resistor was, what circuits work with diodes, a switch, and many other things.. AM radio, etc. If one figured out a circuit, then it was easy to head to RS, pick up the parts needed, breadboard it... or if you were feeling like a challenge, the PCB etchant kit which consisted of PCBs, a Sharpie, and FeCl3 in a bottle that you swished around this side of forever to etch all the copper off your hand-drawn PCB. From there, use a drill bit, and then drop your through-hole stuff in (at the time, not much was SMT.)
Is it better than now? Debatable. With how easy it is to have boards made and SMT stuff done, one can focus on how to use the chips, not praying that your 555 and your 741 didn't have a solder bridge, otherwise you are making magic smoke. However, just being able to throw components together and figure out what did what was invaluable.
I miss these days.
What I can see a resurrected Radio Shack being like, would be a makerspace. Decent 3D printers (Bambu, Prusa), high quality filament, good laser cutters, and so on. Going full MicroCenter is out for computer parts selection, but having basics like RAM, hard drives, and other basic accessories would be a boon. Cellular stuff is fine, but the days of running a store from that are long gone.
What would resurrect Radio Shack type stores is more user repairable items. RtR would greatly help here. One reason RS died was because people just tossed their electronics and bought them, as opposed to repairing them.
Of course, add some old school Sharper Image with some cool new gadgets every so often, and this brand can be brought back from the dead.
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The books were great! I purchased every one of the Forest Mims electronic schematic notebooks back in the day and still have every one of them. I also purchased every Z80 and 6809 Assembler book I could get my hands on back then. My parents purchased me the 300 in 1 electronics project kit from Radio Shack for Christmas when I was 12 which started me on this path to begin with. My father was an electronics technician so I was surrounded by this stuff from as early as I can remember.
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The "maker movement", R-Pi's, Arudinos, robotics, etc. should have been a natural thing for RS but they missed this mark, entirely.
RadioShack didn't just miss the maker movement, they bailed out of the industry 10 years before it started. They were a glorified mobile phone sales centre long before the first Arudino hit the shelf.
What were you thinking? (Score:2)
I'm always amazed by these idiots with their Ponzi schemes, did they think they were going to be able to continue to do this forever? It's a financial perpetual motion machine, at some point it's going to stop and everyone will know what you were doing. And you're still in the country, haven't grabbed your ill-gotten gains and flown off to Vanuatu or Israel? Why? If they had been content to loot a widows and orphans fund or retirees' pensions while working for one of the big brokers they would probably
Re: What were you thinking? (Score:2)
Seems to work for crypto whales.
Reminds me of the old joke. A man falls from a skyscraper, as he falls by the stories he keeps on thinking "so far I'm ok".
There are many people that have a short horizon with regards to consequences. I have a brother like that which has a somewhat successful business, but he keeps on getting in trouble financially and legally for various small reasons. Anything that smells like easy money is a sure win for him, like crypto, and he just keep on spending above his means.
I do n
The entire world is built on such lies (Score:5, Interesting)
Most of the modern world/market is fueled by lies. Lies of infinite growth, copious returns and unlimited riches. It's bloody difficult to actually make money. On the other hand, it's fairly easy to install an overly charismatic individual as the front face of a company who is full of shit and empty promises.
Re:The entire world is built on such lies (Score:5, Insightful)
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They should have started their own cryptocurrency exchange. Since its impossible to actually quantify the stuff or even prove it actually exists.
Is that why... (Score:3)
....they needed my address when I bought a battery?
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I first noticed this as a teen but and, different world; I thought it was weird to hassle a customer and slow down the line. I didn't totally mind at first because I like getting the catalog and then it was like I already get the catalog let's skip it please and the guy gave me a hassle.
It was terribly confusing at the time but now 3 decades later, in retrospect, it all makes perfect sense.
Now I see most companies are going down this path, constantly wanting my dox or my opinion, when i see an NPS prompt i
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On fire, fire sale, what's the difference?
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Battery Club (Score:2)
That battery club says always a scam. About time they got taken down!
:CueCat o'9 tails (Score:2)
New Hotness : Monthly Battery Club Card
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I was a member.
I eventually noticed they didn't offer alkaline batteries, just dry-cell mercury-oxide batteries so I quit being a member.
Re: How different is this from (Score:2)
Or from crypto currency.
In the case of tech investment the thing is that if the tech actually starts working as claimed it can be very profitable. If you are enough teach savvy you can weed out the most obvious technologies that are fakes, like Theranos. For most investors it is like investing in a Fool Us winner: we don't know how it works but it looked cool.
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There goes... (Score:2)
There goes my Radio Shack battery club membership...
--JoshK.
Rich target escapes (Score:2)
Sad this high potential story got nary a Funny. Right at the bottom of the top page now, about to leap into oblivion--as Radio Shack already did. Probably related to Slashdot's achievement of obscurity on its own way to oblivion?
Bash.org had such a great collection of jokes... Lost, lost, forever lost.