| Does this sound familiar? REV’s primary business was purchasing distressed retail companies with name brand recognition and converting them into e-commerce only businesses. The securities offerings at issue involved offerings by REV and eight REV portfolio companies: Brahms LLC (“Brahms”), Dress Barn Online, Inc. (“Dress Barn”), Franklin Mint Online, LLC (“Franklin Mint”), Linens ‘N Things Online, Inc. (“Linens ‘N Things”), Modell’s Sporting Goods Online, Inc. (“Modell’s”), Pier 1 Imports Online, Inc. (“Pier 1”), RadioShack Online, LLC (“RadioShack”) and Stein Mart Online, Inc. (“Stein Mart”).
Franklin Mint! RadioShack! Bed Bath & Beyond! GameStop! No wait. Not those. Just the first two. Not Bed Bath, not GameStop. Bed Bath & Beyond sure was distressed; it filed for a horrific bankruptcy in 2023. But before that it raised tons of money from retail investors in absolutely doomed at-the-market offerings. As its bankruptcy lawyers later put it, it raised that money as “part of the ‘meme-stock’ movement started and fueled on Reddit boards and social media websites,” because it “checked the two boxes needed to become a meme-stock: (i) a troubled financial situation and (ii) nostalgia value.” And because it checked those boxes, Bed Bath was able to go out to ordinary investors and get them to shovel money into a furnace. GameStop was also part of that movement — GameStop was that movement — because it was troubled and nostalgic, but it did so well out of being a meme stock that it is no longer particularly distressed. Definitely some pivoting to e-commerce though. My point here is that if you go to retail investors and say “hey, let’s teach those fat cats on Wall Street a lesson; we’re going to revive RadioShack but with e-commerce,” you are tapping into some deep and obvious patterns, and you will undoubtedly raise a bunch of money. Then you can steal it. [1] The quote at the top is from a Securities and Exchange Commission enforcement complaint against Taino Adrian Lopez, Alexander Mehr and Maya Burkenroad. Bloomberg News reports: A company that snatched up distressed brick-and-mortar brands including RadioShack and Pier 1 Imports and promised investors big returns in a pivot to e-commerce operated as a Ponzi-like scheme, the US Securities and Exchange Commission alleged. When the pandemic sparked a wave of retail bankruptcies, Retail Ecommerce Ventures picked up a slew of iconic brands on the cheap, with the aim to revive them as online-first businesses. Its portfolio also includes Dress Barn, Modell’s Sporting Goods and Stein Mart. To attract investors, REV bragged in promotional videos that its portfolio companies were “on fire,” the regulator alleged in a lawsuit filed Monday in federal court in the Southern District of Florida. But, says the complaint, “while some of the REV Retailer Brands generated revenue, none generated any profits,” “at least $5.9 million of the returns distributed to investors were, in reality, Ponzi-like payments funded by other investors,” and also the defendants “misappropriated approximately $16.1 million in investor funds, which was diverted for Defendants Lopez’s and Mehr’s personal use.” The complaint also explains the business strategy, or at least the fundraising strategy: REV’s primary business was identifying distressed companies with name brand recognition, raising funds from investors in order to purchase the brand’s assets, and converting them into successful e-commerce-only businesses. In one promotional video publicly available on the internet, Defendant Lopez touted REV’s business approach as “one of the best strategies you can invest in.”
“A troubled financial situation and nostalgia value,” the two best things you can have to raise money from individual investors in the 2020s. Man alive this is the best business in the world: Tether Holdings SA, issuer of the world’s largest stablecoin, is in talks with investors to raise as much as $20 billion, a deal that could propel the crypto firm into the highest ranks of the world’s most valuable private companies. ... Depending on the stake offered, the deal could value the company at around $500 billion, putting it into the same league as OpenAI and Elon Musk’s SpaceX, an extraordinary achievement for the lightly regulated crypto business even as rivals multiply and falling US interest rates threaten its windfall earnings. … Tether is at the forefront of stablecoins, a type of digital asset that pegs its value to fiat currencies. Its USDT token is tied to the US dollar with a market value of $172 billion. It is by far the largest, with Circle’s No. 2-ranked USDC stablecoin worth about $74 billion. Tether has made a fortune by parking the reserves that back its token in cash-like assets including US Treasuries, and earning interest. It booked $4.9 billion in profit during the second quarter, according to a company blog post in July. Ardoino recently claimed Tether has a 99% profit margin. The figures Tether cites are not subject to the same reporting standards as those disclosed by publicly traded companies. OpenAI is trying to build artificial superintelligence. SpaceX is trying to go to Mars. What is Tether? One simple model is that Tether is an asset management firm with unusual economics. The economics are: - People give Tether money — currently $172 billion — to invest.
- Tether invests that money with absolute discretion, though for various reasons it invests mostly (not entirely) in US Treasury bills and other safe short-term assets.
- Tether keeps 100% of the investment returns for itself as a management fee.
The first two features are not that unusual. The third is wild! The Vanguard Federal Money Market Fund has about $362 billion of assets — roughly twice Tether’s assets — and invests in US Treasury bills; it charges an 0.11% annual fee. Tether charges, in round numbers, 40 times as much. [2] I write sometimes about a crude valuation model for asset management firms. Basically a low-fee index-y asset manager charges fees on the order of basis points of assets under management, and the management company — the stream of fee earnings for managing those assets — should be worth on the order of 1% of assets. A high-fee alternatives-type asset manager charges fees on the order of percentage points of assets, and the management company should be worth on the order of 10% of assets. [3] Tether is trying to raise money at 300% of assets under management. Which: sure! If you pay that valuation, it is a bet that: - Tether’s assets are poised to grow enormously (because it is coming back into regulatory favor in the US, because stablecoins are the future of money and because Tether will continue to dominate the stablecoin business); and
- It will continue to be able to keep 100% of its returns for itself.
As for the first bet: Tether has spent the last few months laying the groundwork to return to the US, in a bid to capitalize on President Donald Trump’s pro-crypto policies. It recently unveiled a plan for a US-regulated stablecoin and appointed Bo Hines, a former White House crypto official, to lead it.
And: The El Salvador-based group is expected to hoover up even more Treasuries in the near future. Treasury secretary Scott Bessent has signalled that large stablecoin operators will become a key source of demand for the deluge of US government debt required to fund the administration’s spending plans.
As for the second bet … look, what do I know, nothing here is ever investment advice, and there is reason to doubt it. We talked just yesterday about the growing norm of stablecoin issuers passing along most of their interest income, indirectly, to depositors, which makes this a much less lucrative business than if the issuers keep 100% of the income themselves. But Tether, as the biggest and most … Tether-y … stablecoin issuer, might be able to resist that trend. If Tether ends up owning a trillion dollars of Treasury bills, collecting 5% per year, [4] paying 0% to the people who deposited the trillion dollars and having a 99% profit margin, then … I don’t know how to end that sentence? That will justify a $500 billion valuation, sure. (That’s like a 10x P/E ratio.) But also … what? I feel like I write a lot about all the complex and sophisticated ways people have found to make money with other people’s money, and Tether is just like “why don’t you give us all the money and we’ll collect all the interest” and it works. One trade is: You buy $100 worth of Bitcoin, you put it in a pot, you sell shares in the pot for $200, you use the extra $100 to buy more Bitcoin, now you have $200 worth of Bitcoin, the shares are worth $400, you sell more shares, etc. This is the “crypto treasury trade” that we talk about a lot around here. I have called it a “perpetual motion machine,” but it isn’t, and now crypto treasury companies are having a harder time keeping their premiums to net asset value. Another trade is: If you have $200 worth of Bitcoin in your pot, but this trade has become oversaturated and now shares of the pot trade for just $100, you sell $100 of your Bitcoin, you use the $100 to buy back all the stock, and now you have $100 worth of Bitcoin that you own free and clear without any shareholders. It’s possible that, with the right mindset, a volatile crypto treasury company premium is even better than a consistently high one. Probably not. This reverse crypto treasury trade seems if anything harder than the regular one, but in small size it’s fine. The Financial Times reports: Struggling crypto-hoarding companies are launching share buybacks in an attempt to boost their stock prices, in the latest sign that this year’s “crypto treasury” craze is unravelling. An online gaming company and a maker of golf carts are among lightly traded companies that pivoted to buying cryptocurrencies as little as two months ago, yet are now embarking on share buybacks in an effort to lift their falling stock prices. Some are taking on debt to fund the purchases. At least seven companies have taken such steps in recent weeks — five of which have a market value that has sunk below the value of their crypto holdings, as investors worry about a saturated market and raise questions about the crypto treasury business model. “It’s probably the death rattle for a few [of these companies],” said Adam Morgan McCarthy, senior research analyst at crypto analytics company Kaiko. … “It’s only been six months and we’re already talking about their demise,” said Elliot Chun, partner at crypto advisory firm Architect Partners. “A very small percentage are going to succeed.” Raising money to buy back shares instead of spending it on tokens was “antithetical” to the crypto treasury concept, he said. No, right, yes, the concept was “we can sell shares at a premium to net asset value and get rich,” and if your shares trade at a discount to net asset value the thing doesn’t work as well. Elsewhere: “Scaramucci-Backed Crypto Treasury Company Launches With $550 Million Fundraising Plan.” And: “Inside the Princeton Network Fueling a Crypto Treasury Boom.” Is bribing your tax auditor with trips to the strip club securities fraud? | I mean: - Every bad thing that a public company does is also securities fraud.
- We talked last week about New York criminal charges against RCI Hospitality Holdings Inc., a company that owns and operates strip clubs and that allegedly lowered its sales tax bill by bribing a state tax auditor with lap dances. Bad if true!
- RCI is a publicly traded company.
So the syllogism requires: A securities fraud class action was filed in federal court against RCI Hospitality Holdings Inc., which operates a chain of strip clubs throughout the US. The claims stem from the tax fraud and bribery charges filed last week against the company and several officers by New York Attorney General Letitia James (D). The company allegedly provided a New York Department of Taxation and Finance auditor with trips to clubs in Florida in exchange for favorable audits. RCI allegedly didn’t pay $8 million in sales taxes to New York City. Between Dec. 15, 2021, and Sept. 16, 2025, the company’s chief executive officer Eric Langan and chief financial officer Bradley Chhay filed statements with Securities and Exchange Commission that failed to disclose the schemes, understated the company’s lack of proper design and implementation controls, or downplayed the James investigation, the complaint filed Sunday by Alex Hernandez in the US District Court for the Southern District of Texas says. The value of RCI stock dropped from $34.32 to $25.80 by Sept. 17 due to the charges, the complaint says. Yep: Bad stuff, stock went down, securities fraud lawsuit. Incidentally RCI is about a $260 million company, and that $8.52 stock-price drop represents about $74 million of lost market value. RCI allegedly saved $8 million in sales tax with the bribes. Arguably the shareholders’ securities lawsuit (for $74 million in damages) is worth more than New York’s bribery case (over $8 million in taxes). “Everything is securities fraud” because securities fraud is the most valuable sort of lawsuit. Nothing in this column is ever investing, legal, tax, accounting, etc., advice, but I do have one long-running, sincerely held, urgent piece of aesthetic advice, which is: Do not under any circumstances participate in your company’s corporate rap parody video. Anyway here’s Klarna’s version of “Not Like Us.” (“Finna max out this quarter, we in Stockholm, shop shop shop shop shop in your own way, pay pay pay pay pay in a smart way,” etc.) Nope! The Trillion-Dollar Race for European Money Management’s Future. Wall Street Is Poaching Bankers in a Red-Hot Job Market. Bessent Says US Negotiating $20 Billion Swap Line With Argentina. Milei Is Counting on Trump to Bail Argentina Out of an Economic Mess. Big banks unwind Hong Kong retreat as dealmaking booms. Tricolor Interest Payouts Clawed Back From Bondholder Accounts. US debt investors raise alarm over lending standards. Wall Street Hedges Backfire as Volatility in Rates Market Sinks. Marshall Wace Sues to Block Crypto Data Firm’s New Financing. Oracle Looks to Raise $15 Billion From Corporate Bond Sale. Stripe’s Valuation Rises Above Its 2021 Peak to $106.7 Billion. Alibaba Shares Soar After Hiking AI Budget Past $50 Billion. Nvidia’s OpenAI Deal Fuels ‘Circular’ Financing Concerns. Cocoa Rebounds as Attractive Prices Lure in Bean Buyers. Households should keep emergency cash, ECB study suggests. Diddy, SBF and Bill Hwang Are Relying on Wall Street’s Last-Chance Lawyer. Peter Thiel Wants Everyone to Think More About the Antichrist. Trump’s UN Escalator Mishap Prompts Secret Service Investigation. CNBC’s Jim Cramer pulled out his catheter in shock after GameStop rally, needed 24/7 security. If you'd like to get Money Stuff in handy email form, right in your inbox, please subscribe at this link. Or you can subscribe to Money Stuff and other great Bloomberg newsletters here. Thanks! | 
