EXEC: Buyers of Modell’s Sporting Goods Brand Accused of Running Ponzi Scheme

The Securities and Exchange Commission (SEC) has accused two individuals who purchased well-known retailers out of bankruptcy proceedings, including Modell’s Sporting Goods, RadioShack and Pier 1 Imports of running a Ponzi scheme that raised roughly $112 million from investors through fraudulent means.

Retail Ecommerce Ventures, a Miami Beach-based holding company founded by Taino Lopez and Alexander Mehr, acquired at least eight consumer-facing retailers, also including Dressbarn, Stein Mart and Linens ’N Things, according to an SEC complaint in the U.S. District Court for the Southern District of Florida. Many were acquired out of bankruptcy with the intention of converting them into online-only operations.

According to the SEC lawsuit, between April 2020 and November 2022, Lopez and Mehr raised money by selling two types of investments: unsecured notes that promised returns of up to 25 percent a year and ownership shares that offered monthly payouts as high as 2 percent, according to the complaint.

The SEC’s suit alleges the two “made material misrepresentations” to hundreds of investors about the bankrupt retailers they had acquired, including overstating how well the businesses were performing. Prospective backers were also reportedly told the money raised for a company would only be invested in that company, although that proved not to be the case.

“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.”

At least $5.9 million of the returns distributed to investors were “Ponzi-like payments funded by other investors,” the complaint said.

Mehr and Lopez were also accused of misappropriating approximately $16.1 million in investor funds for “their personal use.”

Secured creditors foreclosed on Retail Ecommerce Ventures’ assets in 2023, with most of those assets assigned to a new holding company, Omni Retail Enterprises.

Neither Mehr nor Lopez has responded to media requests for comment.

Models Sporting Goods