A Tampa-based real estate investment firm, RAD Diversified REIT Inc., is currently under investigation by Florida Attorney General James Uthmeier’s Office for alleged deceptive practices and a potential Ponzi scheme. Owners Brandon "Dutch" Mendenhall and Amy Vaughn are central to the probe, which stems from numerous investor complaints about missing funds and unfulfilled promises.
Key Takeaways
- RAD Diversified REIT Inc. and its owners are being investigated for deceptive practices.
- Investors report millions of dollars in missing assets, with allegations of a Ponzi scheme.
- The Florida Attorney General’s Office has issued subpoenas for company documents.
- The SEC is also reportedly investigating the firm.
Investigation Launched Amidst Investor Complaints
The investigation was initiated after the Attorney General’s Office received multiple complaints from investors who claimed they could not retrieve their returns or principal investments. Attorney General Uthmeier stated that the firm is suspected of "pocketing cash instead of buying properties as advertised" and that the situation "appears to be a Ponzi scheme."
Subpoenas have been issued to RAD Diversified REIT Inc., its subsidiaries, and its owners, Brandon "Dutch" Mendenhall and Amy Vaughn. The company and its owners have been given a deadline to respond by providing requested documents to prosecutors. The investigation aims to determine if the company’s real estate holdings are equivalent in value to the amount invested by its customers.
Allegations of Financial Mismanagement and Missing Funds
Reports suggest that RAD Diversified, which promoted itself as a path to real-estate riches through seminars and digital marketing, may have lost or misappropriated approximately $100 million in assets. Investors have described a pattern of slowing and then halting income distributions, missed payments on loans, and frozen redemptions. Some joint-venture properties were allegedly sold without the knowledge of partners.
Former employees and investors have raised concerns about the company’s financial practices. One former director of strategic initiatives noted discrepancies in financial data and a request from CEO Brandon Mendenhall to research how Bernie Madoff, a notorious Ponzi schemer, was caught. Another investor, who served on the REIT’s board, discovered that the REIT was "broke," with declining rent collections, unpaid taxes and insurance, and properties in foreclosure. This investor estimated that RAD companies held about $90 million in property against at least $90 million in debt.
Regulatory Scrutiny and Legal Actions
In addition to the Florida Attorney General’s investigation, the Securities and Exchange Commission (SEC) has also reportedly been looking into RAD Diversified. The SEC had previously halted RAD Diversified REIT’s ability to raise new funds by declaring its offering statement abandoned. The company has faced multiple lawsuits, with several default judgments totaling millions of dollars issued against RAD entities in Hillsborough County.
RAD Diversified’s business model, which utilized provisions of the JOBS Act like Regulation D and Regulation A+, allowed it to raise significant capital without the extensive disclosures typically required for public offerings. This has been a common avenue for companies offering non-traded REITs, which are less regulated and provide less ongoing disclosure compared to publicly traded REITs.
Founders’ Background and Business Evolution
RAD Diversified was founded by Brandon "Dutch" Mendenhall and Amy Vaughn, along with Randle Bowling, who left in 2020. Mendenhall, an author and former baseball coach, transitioned into real estate education before launching investment funds. Vaughn, described as the sales engine behind Mendenhall’s seminars, has a background in real estate and insurance. The company evolved from hosting seminars to directly investing in real estate deals, creating various investment programs and funds.
Sources
- Tampa real estate investment firm under investigation for potential deceptive practices, Florida Politics.
- Inside a Florida Real Estate Collapse, Forbes.
- Plantation medical office tied to Wells Real Estate Investment, Janalie Joseph Ponzi scheme in foreclosure
auction, The Business Journals. - Boca Raton man nabbed for $410K real estate scam, duping 16 investors, WPEC.