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UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
CASE NO.
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
v.
RAD DIVERSIFIED REIT, INC.,
BRANDON “DUTCH” MENDENHALL, and
AMY VAUGHN,
Defendants; and
THE SEMINAR SOLUTION, LLC,
Relief Defendant.
___________________________________________/
COMPLAINT FOR INJUNCTIVE AND OTHER RELIEF
AND DEMAND FOR JURY TRIAL
Plaintiff Securities and Exchange Commission (the “Commission” or
“SEC”) alleges:
I.
INTRODUCTION
1.
The Commission brings this action to enjoin RAD Diversified REIT,
Inc. (“RADD”), headquartered in Tampa, Florida, and its founders Brandon
“Dutch” Mendenhall and Amy Vaughn (collectively, “Defendants”) from
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committing further violations of the anti-fraud and securities registration
provisions of the federal securities laws.
2.
From November 2019 through March 2024 (“Relevant Period”),
Defendants raised at least $152 million from more than 5,500 retail investors
nationwide through an unregistered fraudulent securities offering. During the
Relevant Period, RADD raised investor funds through both its stock offerings and
investments offered through its “Inner Circle” program, all while systematically
deceiving investors about RADD’s profitability, the valuation of its stock, and its
liquidity. Defendants’ conduct has caused financial hardship to thousands of
investors nationwide and has jeopardized many of their retirement savings. Many
investors were not accredited. Defendants, directly and through RADD’s sales
agents, encouraged investors to invest by withdrawing funds from their selfdirected IRAs, using credit cards, taking out home equity loans, or using life
insurance proceeds.
3.
Defendants led investors to believe that RADD was a profitable real
estate investment trust (“REIT”) that generated substantial revenue from rental
income and sales of refurbished properties, and that it paid cash dividends from
those profits. Defendants ran an extensive marketing campaign across social
media, in-person meetings, and through unregistered sales agents using
high-pressure sales tactics. Defendants invoked themes of Christian values and
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patriotism to create a sense of trust and security for investors. In prolific social
media promotions and sales scripts prepared by Defendants and used by their
agents, Defendants repeatedly claimed that “zero investors have ever lost money
on their investment” and “none of our Inner Circle partners have ever lost money.”
4.
Contrary to their representations, however, Defendants knew that
RADD’s financial picture was bleak, with millions of dollars in annual losses
reflected in internal profit-and-loss statements.
5.
Defendants also touted RADD’s ever-increasing stock price, which
purportedly increased 150% from 2019 to 2023. Defendants gained investors’
confidence by routinely and repeatedly asserting that RADD’s stock price was
based on objective, independent valuations of the REIT’s properties, calculated by
external accountants, and would be regularly updated. These assertions were
false. RADD used Mendenhall’s brother, who was RADD’s Vice President of Real
Estate Operations yet had no meaningful property valuation experience, to
perform the valuations. And no third-party appraiser, evaluator, or accountant,
participated in the determination of RADD’s stock price.
6.
Defendants boasted about RADD’s liquidity and gained investors’
confidence by assuring them that if they were not satisfied, they could redeem
their investments through an established process. In truth, Defendants routinely
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denied or ignored investors’ redemption requests because RADD lacked sufficient
liquidity to honor them. In February 2024, RADD froze stock redemptions.
7.
Together with RADD’s stock offerings, Defendants promoted access
to an “exclusive” investment group, RADD Inner Circle, which purportedly
provided members access to invest in Hard Money Loan notes (“HML Notes”)
promising 20% returns and joint venture real estate deals (“JV Agreements”), each
not otherwise available to non-members. In truth, these opportunities were neither
exclusive nor capable of producing the returns Defendants claimed.
8.
On top of their misrepresentations to investors, Defendants diverted
approximately $54 million of RADD investor funds into the bank accounts of an
affiliated entity owned and managed by them, The Seminar Solution (“TSS”).
Through this scheme, Mendenhall misappropriated approximately $2.3 million
and Vaughn misappropriated approximately $2.5 million in investor funds. They
used these misappropriated investor funds to pay for personal expenses, such as
IRS tax obligations, private jet charters, high end jewelry and clothing, and various
recreational and personal expenses.
9.
By engaging in the conduct alleged in this Complaint, Defendants
have violated, and unless enjoined, are reasonably likely to continue violating,
Sections 5(a), 5(c), and Section 17(a) of the Securities Act of 1933 (“Securities Act”)
[15 U.S.C. §§ 77e(a) and (c); § 77q(a)], and Section 10(b) of the Securities Exchange
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Act of 1934 (“Exchange Act”) [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.R. §
240.10b-5] thereunder.
II.
DEFENDANTS AND RELIEF DEFENDANT
A. Defendants
10.
RADD is a Maryland corporation formed in 2017, and its principal
place of business during the Relevant Period was in Tampa, Florida. RADD is a
REIT that raised at least $152 million from over 5,500 investors. RADD has never
been registered with the Commission. On March 1, 2026, RADD filed a Voluntary
Petition for Bankruptcy under Chapter 11 of the U.S. Bankruptcy Code in the
Middle District of Florida, In re RAD Diversified REIT, Inc., 8:26-bk-01636 (Bankr.
M.D. Fla. Mar. 1, 2026) (jointly administered with associated cases 8:26-bk-01637
through 8:26-bk-01640) (“Voluntary Petition for Bankruptcy”).
11.
Mendenhall, 47, is a resident of Tampa, Florida, and is RADD’s Chief
Executive Officer, President, Director, co-owner, and co-founder. Mendenhall also
is an owner of TSS and RADD’s investment manager, RAD Management, LLC
(“RAD Management”). Mendenhall has never held any securities licenses and has
never been registered with the Commission in any capacity, nor associated with a
registered entity.
12.
Vaughn, 48, is a resident of Tampa, Florida, and a Director, co-
founder, and co-owner of RADD. Vaughn also is an owner of TSS and RAD
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Management. Vaughn has never held any securities licenses and has never been
registered with the Commission in any capacity, nor associated with a registered
entity.
B. Relief Defendant
13.
TSS, a Nevada limited liability company, with its principal place of
business in Tampa, Florida, operated out of the same office space as RADD during
the Relevant Period. It is owned by Vaughn and Mendenhall and employed sales
agents selling investments in RADD. Since 2020, TSS has received approximately
$34 million in direct deposits of RADD investor proceeds, in addition to a net of
approximately $20 million of commingled investor funds transferred from RADD.
III.
14.
JURISDICTION AND VENUE
This Court has jurisdiction over this action pursuant to Sections 20(b),
20(d), and 22(a) of the Securities Act [15 U.S.C. §§ 77t(b), 77t(d), and 77v(a)]; and
Sections 21(d), 21(e), and 27(a) of the Exchange Act [15 U.S.C. §§ 78u(d), 78u(e) and
78aa(a)].
15.
This Court has personal jurisdiction over Defendants and the Relief
Defendant and venue is proper in the Middle District of Florida because: (a)
Mendenhall and Vaughn reside in this District; (b) RADD’s principal place of
business was in this District; (c) a portion of RADD’s real estate, purchased with
investor funds, is located in this District; (d) a substantial part of the events or
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omissions giving rise to the violations of the Securities Act and the Exchange Act
occurred in the District; and (e) TSS was located in this District and received funds
directly from RADD.
16.
In connection with the conduct alleged in this Complaint, Defendants,
directly and indirectly, singly or in concert with others, made use of the means or
instrumentalities of interstate commerce, the means or instruments of
transportation or communication in interstate commerce, and of the mails.
IV.
FACTUAL ALLEGATIONS
A. RADD’s Business and Securities Offerings
1. RADD’s REIT and Stock Offerings
17.
Defendants marketed RADD as a REIT that purchased, renovated,
and leased income-producing residential properties across the United States. A
REIT is a company that owns or finances real estate that generates income.
Investors buy shares and can earn dividends and overall returns without having
to purchase, renovate, manage, or finance properties themselves. RADD’s REIT
was a non-traded REIT, thus its shares were unavailable on a public stock
exchange for purchase or sale.
18.
RADD’s website prominently illustrated its business model under the
banner “How it Works”:
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Thus, RADD purportedly would use investor funds to purchase and refurbish
distressed properties, collect rents from tenants in those properties, and pay
investors cash dividends from rental proceeds.
19.
Mendenhall described RADD as “real estate done for you.”
Defendants exercised exclusive control over RADD’s daily operations and in
selecting properties to acquire and develop. The properties RADD purchased for
the REIT were located primarily in Pennsylvania and Florida, with additional
properties in Texas, California, New Jersey, Idaho, and Delaware, totaling more
than 550 properties at the REIT’s peak. As reflected in this 2022 investor
presentation, Defendants assured investors, “We handle everything.”:
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During the Relevant Period, RADD raised approximately $104
million from investors through stock offerings in the REIT. RADD provided
investors and prospective investors with (1) offering circulars signed by
Mendenhall, Vaughn, and others; (2) Private Placement Memorandums (“PPMs”);
and (3) subscriptions agreements (collectively, “Offering Materials”). RADD stock
investors deposited their funds into RADD’s operating accounts. RADD’s stock
are securities under the Securities Act and Exchange Act and are described as such
in RADD’s Offering Materials.
2. RADD Inner Circle’s Program, and Defendants’ Offer and Sale of
Investments in HML Notes and JV Agreements
a. RADD Inner Circle
21.
RADD promoted its “RADD Inner Circle” membership as a $50,000
“exclusive” entry into RADD’s top investment opportunities, including high
interest HML Notes and JV Agreements. In practice, however, Defendants often
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accepted far less and encouraged investors to pay the membership fee via credit
card.
22.
Mendenhall stated that there was a “marriage” between the REIT and
RADD Inner Circle and touted its purported “elite” status, as shown here:
23.
To join, investors executed a Memorandum of Understanding
(“MOU”) with a fictitious entity Defendants called “RADD Inner Circle” and
signed by Mendenhall or another RADD executive. The MOUs did not have
investor qualification questions. The MOUs directed investors to wire their funds
to RADD Inner Circle’s bank account. However, the bank account was in the name
of Mendenhall and Vaughn’s other company—TSS. Investors believed they were
remitting fees to invest in RADD’s top investment opportunities and were not
familiar with TSS.
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Just as with RADD’s stock offerings, Defendants marketed RADD’s
Inner Circle program, including HML Notes and JV Agreements, as “Real Estate
Done For You,” and portrayed Inner Circle as a path to wealth, as demonstrated
here:
b. HML Notes
25.
From March 2022 through March 2024, RADD raised approximately
$23 million from selling the HML Notes to over 200 investors nationwide.
Defendants promoted the HML Notes, signed by Mendenhall or another
representative on behalf of RADD, as an investment opportunity for RADD Inner
Circle members to earn high interest returns. Defendants sold the HML Notes to
raise capital for RADD’s general business use and to finance substantial
investments. In turn, the investors purchased the HML Notes to make a profit
generated by RADD’s business and in the form of higher than market-rate interest.
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The HML Notes were offered and sold to the public through RADD’s website and
online social media marketing campaigns directed toward the public at large.
26.
With RADD as the loan beneficiary, HML Notes typically were an 18-
month term, and on the seventh month, investors were supposed to begin
receiving their principal back monthly on an annualized basis, along with 20%
interest per month for the remainder of the unpaid principal. If not timely repaid,
RADD was required to pay investors an additional 1% of the outstanding balance
per month until the HML note was repaid in full. Investors were instructed to wire
their funds into bank accounts in the name of RADD and RADD Inner Circle, but
which were actually designated for wiring to TSS’s accounts.
27.
The HML Notes are securities in the form of notes under the Securities
Act and Exchange Act. Investors in HML Notes, whose role was limited to
investing in them, depended on Defendants to successfully operate and manage
RADD to enable investors to achieve the promised returns. Investors understood
that RADD would use the HML Notes to further its real estate ventures, over
which investors exercised no control. No registration statement was filed or in
effect with the Commission pursuant to the Securities Act with respect to the HML
Notes’ securities and transactions described in this Complaint and no exemption
from registration existed with respect to these securities and transactions.
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c. JV Agreements
28.
From at least November 2019 through March 2024, RADD raised
approximately $16.5 million from selling the JV Agreements, signed by
Mendenhall or other RADD representatives. RADD received investor funds from
the JV Agreements into its main operating account. Defendants promoted the JV
Agreements as an opportunity for RADD Inner Circle members to partner with
RADD in real estate investment deals. Under the JV Agreements, RADD and the
investors were to equally split the cost to acquire and renovate the properties and
equally split rental payments and sales profits.
29.
The JV Agreements are securities in the form of investment contracts
under the Securities Act and Exchange Act. RADD provided investors with preselected lists of properties to invest in that were located exclusively through the
efforts of RADD. Mendenhall described JV Agreements as “hands-off,” and said
RADD would do all renovations and handle all aspects of rentals and sales. The
JV Agreements stated that RADD would act as agent to operate the business
venture and “solely make all decisions” on the properties and joint venture. The
investors’ roles were limited to investing money in the JV Agreements, and they
had no actual or legal authority to exercise entrepreneurial or managerial control
over the investments to generate profits. Defendants pooled investors’ funds into
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bank accounts they controlled. Investors’ returns depended entirely on
Defendants’ performance and management.
B. Defendants’ Solicitation of Investors
30.
Defendants prolifically marketed RADD investments in its stock,
HML Notes, and JV Agreements using RADD’s website, YouTube videos,
podcasts, social media posts, in-person seminars, its Offering Materials, and
through its team of sales agents. Advertisements for RADD investments appeared
on investors’ Facebook feeds, their IRA account platforms, and online investing
newsletters. When investors clicked on the links, they were directed to RADD’s
website, which described how investors could make money by buying shares of
RADD stock and investing in HML Notes and JV Agreements available
exclusively through the RADD Inner Circle.
31.
Defendants talked about Christian values and Mendenhall made
comments about his deep faith which gave investors comfort and encouraged
them to trust RADD. Defendants also emphasized patriotism, routinely included
references to America and images of the American flag in RADD’s social media
content, and talked about the importance of helping military veterans, which
resonated
with
investors.
RADD’s
handle
was
“@redefineamericandream,” with a tagline, “We’re a cultural and financial
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shifting of consciousness for Americans. If you don’t love this country, go
somewhere else.” RADD’s Instagram invoked all these themes, as seen here:
32.
In publicly available videos and podcasts, Mendenhall touted
RADD’s positive returns, the money RADD purportedly made for investors, and
RADD’s cash flow from rental income. He described RADD as a “cash company”
that “makes money.” He also emphasized RADD’s ever-increasing stock price. In
a June 2022 email to investors, Mendenhall wrote, “As of today, our REIT has
reached a value of $20.03 per share! Let that sink in… we have doubled the equity
of our REIT investors’ shares in less than 3 years. Since its inception in September
2019, that marks an increase of 100.3%.” A large button at the end of the email
above Mendenhall’s picture invited recipients to the email to “Invest Now!”
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RADD employed approximately 60 internal sales agents to solicit
investors to invest in RADD’s stock, HML Notes, and JV Agreements. The sales
agents used RADD’s sales materials, approved by Vaughn, whom Mendenhall
nicknamed “Sales Goddess,” and likewise characterized RADD as a thriving
company. Sales scripts instructed sales agents to leave investors and prospective
investors repeated voicemails, text messages, and emails. Defendants repeatedly
stressed that salespersons should emphasize the returns on investment that RADD
purportedly provided and that time was of the essence to invest.
34.
In a publicly available sales meeting video posted on LinkedIn during
the Relevant Period, Mendenhall and Vaughn sat side-by-side at the head of the
table talking to sales agents, as seen here:
Mendenhall, with Vaughn nodding along in acknowledgment, directed the sales
agents in soliciting investors to take the following approach:
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I think when you’re on the phone and you’re selling the REIT or
you’re selling our Inner Circle you have to make—have that same
kind of commitment level towards the sale. Right? And—and you
also have to have an attitude like—like, if you don’t get it, you’re a
f**king idiot. Right?
...
And our[]—thing is so much better than anything else that is out
there. There’s nothing even close to it from a comparative standpoint.
Right? Nobody has the kind of returns we have.
35.
Defendants also conducted “Investor Wealth Summits” during which
they promoted RADD’s investments and provided financial education.
Mendenhall and Vaughn directly solicited investors at these summits.
36.
Defendants’ marketing campaign worked—they convinced more
than five thousand retail investors to invest more than one hundred million dollars
in RADD in less than five years. As detailed below, however, Defendants painted
a false picture of RADD’s business, all while Mendenhall and Vaughn helped
themselves to nearly five million dollars in investor funds.
C. Defendants’ Violations of the Anti-Fraud Provisions of the Federal
Securities Laws
1. Material Misrepresentations
a. RADD Was Not a Profitable Business Sustained By Its
Real Estate Operations
37.
Defendants repeatedly and consistently represented during the
Relevant Period that RADD was profitable and had a net positive cash flow. These
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statements were false and omitted material facts about RADD’s deteriorating
financial condition and inability to secure credit.
38.
Mendenhall emphasized that RADD was a thriving, profitable, and
cash-flowing business. For example, in a March 2022 video entitled, “Being
Burned,” Mendenhall stated, “The bottom line is our real estate investment trust
is one that invests and makes money. It’s been proven year after year after year as
a company doing business in the marketplace.” In a January 2023 video entitled,
“Power of RAD,” Mendenhall stated that RADD would “thrive during the worst
of economic times” and was not affected by the stock market. In a September 2023
podcast, he stated, “We are a cash company. We build up our cash. We have more,
you know, money coming in monthly than most people can imagine.”
39.
Sales agent scripts approved by Vaughan touted that RADD invested
in assets “that rent, that [produce] cashflow and make money,” and emphasized
investors receiving monthly income and retirement funding.
40.
RADD’s
sales
manual
instructed
sales
agents
to
repeat
representations to investors such as “[W]e have cash flow, we appreciate it, we
make money and we do it again and again.” RADD’s sales manual, sales scripts,
and social media stated that “zero investors have ever lost money on their
investment.” Defendants sent mailers to investors that boasted, “Since inception,
[RADD has] had a return of 140.80%.”
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Yet, since at least 2022, RADD was in dire financial condition, which
Defendants knew.
42.
At the time that Mendenhall painted a rosy picture of RADD to
investors, Mendenhall knew that RADD’s rental income and real estate sales did
not cover RADD’s operating expenses from 2022 through 2024; he knew that
RADD relied on financing and raising new investor funds to operate; and he knew
that RADD had net operating losses from 2021 through 2024. But he did not
disclose these facts to investors while mispresenting RADD’s financial condition.
43.
Indeed, Mendenhall received financial and cash flow reports in 2022
and 2023 showing RADD was receiving little to no rental income in 2022 and 2023.
Mendenhall also received several text messages from RADD’s accounting
department on a periodic basis containing a dashboard of current balances in
RADD’s bank accounts and current and projected expenses, which revealed
RADD was receiving little to no rental income.
44.
In late 2022, Mendenhall met directly with representatives of a bank
to apply for a $15 million line of credit. RADD provided the bank with copies of
its internal financial statements for the loan application. In response, on February
1, 2023, Mendenhall and others at RADD received an email notifying them that
the bank declined to provide a line of credit because:
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The company looks to be losing $20 million repeatedly and covers
the cost of operational expenses which are abnormally high
through equity raises in the public market. With that[,] our concerns
with the latest financials is the trend continues and if [your] access to
raise public or private funds dries up, the operational cost of the
company is too great to support the current balance sheet. We took a
deep analysis and wanted this to work, but with annual losses this
large and consistent-it is just not possible. (emphasis added)
45.
Vaughn also knew about RADD’s grim financial condition. She was
the ultimate supervisor for payroll across RADD, TSS, and related entities, and
knew about the need to move money between entities under Mendenhall and
Vaughn’s control to cover expenses and delinquent obligations.
46.
Moreover, RADD’s own internal financial records show that its
annual rental income never exceeded $5 million annually. They also reveal that
RADD continuously generated losses and recorded net losses from 2020 through
2024—with annual losses of at least $31 million in 2022 and $22 million in 2023.
47.
Despite RADD’s perilous financial condition, Defendants continued
soliciting investors in RADD stock, HML Notes, and JV Agreements while
misrepresenting that RADD was profitable and had a net positive cash flow.
48.
By 2024, RADD faced widespread mortgage defaults and before its
filing for bankruptcy, faced at least 166 foreclosure actions totaling approximately
$47 million.
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b. RADD’s Cashflow Could Not Support Defendants’ Promises on
the HML Notes and JV Agreements
49.
From at least 2022 to 2024, Defendants misrepresented to HML Notes
and JV Agreement investors into believing that RADD had more than enough cash
flow to pay the HML Notes and operate the JV properties to generate returns.
Mendenhall touted RADD’s outstanding financial condition, and both he and
Vaughn stated that no RADD Inner Circle investors had ever lost money.
Defendants’ statements were misleading because RADD was relying on financing
and raising new investor funds to operate and could not make interest or principal
payments to HML Notes investors. Defendants also commingled investor
proceeds from HML Notes and JV Agreements in RADD and TSS’s operating
accounts, used investor proceeds to cover RADD’s operating costs, and failed to
make property payments which resulted in the foreclosures.
c. RADD’s Stock Price Was Illusory: It Was Not
Independently Valued, It Was Derived From Understated
Mortgage Obligations, and It Was Not Updated
50.
Central to RADD’s marketing was the purported upward trajectory
of its stock price. RADD prominently featured its stock price on its website as
evidence of its profitability, as seen here:
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RADD’s steadily rising stock price—from $10 to $25.04—was an
illusion intended to deceive current and prospective investors. The price was
based on unsupported real estate valuations that did not come from objective
third-party appraisals, independent valuations, or external accountants’
calculations—contrary to Defendants’ representations—and utilized dramatically
understated mortgage liabilities. For example, RADD’s internal balance sheet for
December 31, 2022, which RADD used to calculate its stock price, listed $41.4
million in mortgage debt, even though RADD’s contemporaneous property
finance records reflected $66 million in mortgage debt. Further, Defendants failed
to update the stock price as promised to investors.
52.
RADD’s Offering Materials specified how and when RADD’s stock
price would be determined. As explained in RADD’s Offering Materials, RADD’s
stock price was rooted in the valuation of its net asset value (“NAV”). RADD
calculated its NAV by adding up the fair value of all its properties, subtracting the
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debt on those properties, and then adding any other assets and liabilities. The
stock price was simply the NAV divided by the number of outstanding shares. Per
the Offering Materials, to calculate its NAV, RADD was supposed to value each
property in its portfolio quarterly by either an “objective independent third party
appraiser” or “objective independent third party evaluator” to determine its fair
value. Then, “external accountants” were supposed to work with RADD to
calculate its stock price. RADD was also supposed to update its stock price and
NAV every quarter, and sooner if a material event caused RADD’s stock price to
change by 5% or more.
53.
In a March 2022 video entitled “Being Burned,” Mendenhall, to
engender investor trust, stated, “We have a third party that also does the
assessment of all our assets, of all our values, of all our properties.” This
independent third-party appraiser assertion was repeated at presentations to
investors during investor retreats.
54.
In a May 2024 video focusing on whether RADD was profitable,
Mendenhall, after touting RADD’s ever-increasing stock price being up to $25.04,
stated, “That’s what the numbers are. That’s what the math is. And if I ever found
that there was anything different in the math, then we would change the math.
That’s why there are CFOs, that’s why there are accountants, that’s why there’s
third-party, that’s why there’s auditors.”
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Sales scripts approved by Vaughn for use by RADD’s sales agents
touted RADD’s stock price and included statements about RADD’s use of thirdparty appraisers or evaluators to calculate RADD’s NAV each quarter.
56.
RADD also sent investors “Shareholder’s Periodic Statement[s]”
reflecting the purported current value and their investments’ alleged growth
based on the purported increase in RADD’s stock price.
57.
Defendants’ representations about determining, calculating, and
updating RADD’s stock price were false. RADD did not obtain independent
property appraisals or valuations for its properties. Instead, Mendenhall’s brother,
who was employed by RADD as its Vice President of Real Estate Operations,
determined the value of RADD’s real estate assets. Prior to joining RADD,
Mendenhall’s brother’s work experience was largely working at two prominent
chain restaurants. Mendenhall’s brother and his team relied on superficial online
estimates rather than accepted appraisal standards. Mendenhall’s brother and his
team did not maintain any records of how they determined property values sent
to RADD’s internal accountants. RADD’s internal accountants just accepted those
valuations at face value. And RADD also did not use external accountants to
determine its stock price.
58.
Indeed, RADD was suffering from a foreclosure epidemic which
began in earnest in 2024. And despite widespread foreclosures—internal findings
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showing the stock price was significantly overstated—Defendants failed to update
the $25.04 stock price after July 2023 which was contrary to representations in the
Offering Materials about quarterly and event-driven updates. Defendants never
updated RADD’s stock price beyond July 2023.
59.
The inflated stock price inured to the benefit of Mendenhall and
Vaughn as co-owners of RAD Management, which was entitled to a performance
fee equal to 20% of the increase in the NAV. The higher the NAV, the more fees
paid to RAD Management, enriching Mendenhall and Vaughn. For example,
Mendenhall and Vaughn, through RAD Management, used a purported increase
in NAV and equity for the quarter ending December 2022 to charge RADD
approximately $2.9 million in performance fees. RAD Management—Mendenhall
and Vaughn—also calculated asset management fees equal to 2% of the NAV
every year based on the inaccurate NAV amount.
d. RADD Was Not Liquid as Defendants Repeatedly Touted
60.
Defendants told investors they could withdraw at least a portion of
their investment if they followed the procedures laid out in the Offering
Materials—filling out the requisite form and waiting the allotted six months—
permitting redemption requests every January and June.
61.
In a January 2023 video, Mendenhall stated, “It’s their money. They
should have access to it when they want to have it.” In or around 2022, Vaughn
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told at least one investor that he would have access to his money after the sixmonth holding period.
62.
Still, many investors were not paid even after complying with
RADD’s redemption requirements. After investors submitted redemption
requests, Mendenhall, Vaughn, or both, determined whether and when those
requests would be honored. Preference was given to large investors, investors
planning to attend upcoming RADD events and those who repeatedly
complained. Meanwhile, numerous investors either received no payment or were
met with shifting explanations—such as supposed delays in the accounting
department—or were given false assurances that funds were forthcoming. In
reality, RADD lacked the financial capacity to honor redemption requests because
of its deteriorating financial condition and Mendenhall’s and Vaughn’s
misappropriation of investor funds.
63.
On February 2, 2024, RADD froze redemptions. Despite Defendants’
representations that RADD would revisit its decision to freeze redemptions,
RADD has not unfrozen redemptions. In January 2025, Mendenhall in fact berated
investors for seeking redemptions, saying they were “attacking” RADD.
64.
At the time of the redemption freeze in February 2024, there were at
least $3 million in redemption requests outstanding.
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2. Scheme To Defraud
a. Mendenhall and Vaughn Diverted RADD Investor Funds to
TSS
65.
Mendenhall and Vaughn controlled RADD, TSS, and their bank
accounts, and they commingled investor funds within and across these accounts.
From January 2020 through at least March 2024, RADD received approximately
$118 million of investor funds into its bank accounts. Defendants diverted a net of
approximately $20 million of commingled investor funds from RADD’s bank
accounts to TSS’s bank accounts. TSS also received about $34 million of investor
funds that Mendenhall and Vaughn, unbeknownst to investors, diverted and
commingled directly into TSS’s bank accounts from investments in HML Notes
and JV Agreements, together with fees to join the RADD Inner Circle program.
While TSS had some legitimate income from education revenue, the vast majority
of funds in TSS’s bank accounts were commingled and diverted RADD investor
funds.
66.
Mendenhall and Vaughn knew that RADD Inner Circle funds were
directed to TSS’s bank accounts, that RADD funds were commingled in TSS’s
accounts, and that investors were not told their money would be used for payroll
or personal expenses.
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b. Mendenhall and Vaughn Misappropriated Millions of Dollars
of Investor Funds
67.
Mendenhall and Vaughn diverted millions of dollars from RADD’s
bank accounts and investor-funded TSS accounts for personal use, including
private jets, luxury goods, jewelry, IRS tax payments, nanny services, and other
personal expenditures. All of RADD’s and TSS’s bank accounts were jointly
controlled by Mendenhall and Vaughn.
68.
During the Relevant Period, Mendenhall misappropriated at least
$2.3 million in investor funds. He transferred at least $1.4 million from TSS’s bank
accounts to his personal accounts, paid from RADD’s and TSS’s accounts $691,000
to the IRS on his behalf, paid from TSS’s accounts $75,000 to his nanny, and paid
from TSS’s account $197,000 in American Express (“AmEx”) charges.
69.
Mendenhall’s AmEx charges included more than $50,000 from a high-
end custom clothier, more than $25,000 for AmEx gift cards, nearly $50,000 from
high-end jewelers, and thousands of dollars in various expenses, including
orthodontic charges, adult nightclub expenses, firearms ranges, outdoor sporting
goods stores, and recreation such as golf and bowling, among others.
70.
Vaughn misappropriated at least $2.5 million in investor funds. She
transferred $1.5 million from TSS’s accounts to her personal accounts, paid from
TSS’s accounts $299,000 to the IRS on her behalf, and paid from TSS’s account at
least $747,000 in AmEx charges.
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71.
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Vaughn’s AmEx charges included more than $214,000 in private jet
charters, approximately $173,000 from high-end fashion clothing and accessories
stores, approximately $80,000 from jewelry stores, approximately $40,000 from
adult nightclubs, approximately $15,000 in AmEx gift cards, approximately
$15,000 in Ticketmaster charges, and thousands of dollars for various other
expenses, including to a luxury car dealership, private school, orthodontics, pet
supplies and spa, exercise equipment, and a pawn shop, among others.
72.
While RADD’s offering circular and PPMs stated that Mendenhall
and Vaughn were entitled to salaries as well as management fees upon RADD
meeting certain financial benchmarks, these payments for the benefit of
Mendenhall and Vaughn from RADD and TSS using commingled investor funds
were not designated as salary or management fee payments. And, as described
below, Mendenhall himself publicly stated several times that neither he nor
Vaughn received salary or management fees in 2023 or 2024, and Vaughn
emphasized to investors the sacrifices she had purportedly made for them.
73.
During a December 28, 2024, video question-and-answer session with
investors, Mendenhall stated, “So [RADD] is focused on taking steps we believe
will improve our financial condition and protect our assets. Amy Vaughn and
Dutch Mendenhall as leaders have deferred their personal offer (sic) salaries for
the company for all of 2023 and 2024 calendar year.”
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74.
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In a January 2025 update video call to investors, Mendenhall stated
that he and Vaughn had deferred all management fees until the redemption freeze
would be lifted, and reiterated it by later stating:
Ladies and gentlemen, I have deferred all salary for all of 2023 and
2024. Right? Because at the end of the day, my true wealth is built up
in this. And if this survives and succeeds, then I’m a very, very
wealthy man. If it doesn’t, then I’m an entrepreneur who’s building
my business and building my wealth. And so that’s—thus is life.
Right? Cool.
3. RADD’s Status
75.
In April 2025, Mendenhall and Vaughn finally told investors via
video that the company was preparing to file for Chapter 11 bankruptcy. In the
same video, they asked investors to provide $20,000 to keep RADD operational.
76.
On March 1, 2026, RADD, along with four affiliated entities, filed its
Voluntary Petition for Bankruptcy. The filing placed over 300 properties—single
family homes and vacant lots—under court supervision. Thereafter, the U.S.
Trustee’s Office moved for the appointment of an Examiner, which was granted.
V.
CLAIMS FOR RELIEF
COUNT I
Violations of Section 17(a)(1) of the Securities Act
(Against All Defendants)
77.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
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78.
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By engaging in the conduct described herein, and as alleged in
Paragraphs 65 through 76 above, from approximately November 2019 through
March 2024, Defendants, in the offer or sale of securities by use of the means or
instruments of transportation or communication in interstate commerce or by use
of the mails, directly or indirectly, knowingly or recklessly employed devices,
schemes or artifices to defraud.
79.
By reason of the foregoing, Defendants, directly or indirectly, have
violated and unless enjoined, are reasonably likely to continue to violate, Section
17(a)(1) of the Securities Act [15 U.S.C. § 77q(a)(1)].
COUNT II
Violations of Section 17(a)(2) of the Securities Act
(Against All Defendants)
80.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
81.
By engaging in the conduct described herein, and as alleged in
Paragraphs 37 through 64 above, from approximately November 2019 through
March 2024, Defendants, in the offer or sale of securities by use of the means or
instruments of transportation or communication in interstate commerce or by use
of the mails, directly or indirectly, negligently obtained money or property by
means of untrue statements of material facts or omissions to state material facts
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necessary to make the statements made, in light of the circumstances under which
they were made, not misleading.
82.
By reason of the foregoing, Defendants, directly and indirectly, have
violated and unless enjoined, are reasonably likely to continue to violate, Section
17(a)(2) of the Securities Act [15 U.S.C. § 77q(a)(2)].
COUNT III
Violations of Section 17(a)(3) of the Securities Act
(Against All Defendants)
83.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
84.
By engaging in the conduct described herein, and as alleged in
Paragraphs 65 through 76 above, from approximately November 2019 through
March 2024, Defendants, in the offer or sale of securities by use of the means or
instruments of transportation or communication in interstate commerce or by use
of the mails, directly or indirectly, negligently engaged in transactions, practices
and courses of business which have operated, are now operating or will operate
as a fraud or deceit upon the purchasers.
85.
By reason of the foregoing, Defendants, directly and indirectly, have
violated and unless enjoined, are reasonably likely to continue to violate, Section
17(a)(3) of the Securities Act [15 U.S.C. § 77q(a)(3)].
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COUNT IV
Violations of Section 10(b) of the Exchange Act and Rule 10b-5(a)
(Against All Defendants)
86.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
87.
By engaging in the conduct described herein, and as alleged in
Paragraphs 65 through 76 above, from approximately November 2019 through
March 2024, Defendants, directly or indirectly, by use of the means and
instrumentalities of interstate commerce, or of the mails, knowingly or recklessly
employed devices, schemes or artifices to defraud in connection with the purchase
or sale of securities.
88.
By reason of the foregoing, Defendants, directly and indirectly, have
violated and unless enjoined, are reasonably likely to continue to violate, Section
10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(a) [17 C.F.R. § 240.10b5(a)] thereunder.
COUNT V
Violations of Section 10(b) of the Exchange Act and Rule 10b-5(b)
(Against All Defendants)
89.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
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90.
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By engaging in the conduct described herein, and as alleged in
Paragraphs 37 through 64 above, from approximately November 2019 through
March 2024, Defendants, directly or indirectly, by use of the means and
instrumentalities of interstate commerce, or of the mails, in connection with the
purchase or sale of securities, knowingly or recklessly made untrue statements of
material facts or omitted to state material facts necessary in order to make the
statements made, in light of the circumstances under which they were made, not
misleading.
91.
By reason of the foregoing, Defendants, directly and indirectly,
violated and unless enjoined, are reasonably likely to continue to violate, Section
10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(b) [17 C.F.R. § 240.10b5(b)] thereunder.
COUNT VI
Violations of Section 10(b) of the Exchange Act and Rule 10b-5(c)
(Against All Defendants)
92.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
93.
By engaging in the conduct described herein, and as alleged in
Paragraphs 65 through 76 above, from approximately November 2019 through
March 2024, Defendants, directly or indirectly, by use of the means and
instrumentalities of interstate commerce, or of the mails, in connection with the
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purchase or sale of securities, knowingly or recklessly engaged in acts, practices
and courses of business which have operated, are now operating, and will operate
as a fraud upon the purchasers of such securities.
94.
By reason of the foregoing, Defendants, directly and indirectly,
violated and, unless enjoined, are reasonably likely to continue to violate, Section
10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5(c) [17 C.F.R. § 240.10b5(c)] thereunder.
COUNT VII
Violations of Sections 5(a) and 5(c) of the Securities Act
in the HML Notes Offering
(Against All Defendants)
95.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
96.
No registration statement was filed or in effect with the Commission
pursuant to the Securities Act with respect to the HML Notes’ securities and
transactions described in this Complaint and no exemption from registration
existed with respect to these securities and transactions.
97.
Starting no later than November 2019 and continuing through at least
March 2024, Defendants, directly and indirectly, (a) made use of any means or
instruments of transportation or communication in interstate commerce or of the
mails to sell securities as described herein, through the use or medium of a
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prospectus or otherwise; (b) carried or caused such securities, as described herein,
to be carried through the mails or in interstate commerce, by any means or
instruments of transportation, for the purpose of sale or delivery after sale; or (c)
made use of any means or instruments of transportation or communication in
interstate commerce or of the mails to offer to sell or offer to buy through the use
or medium of any prospectus or otherwise, as described herein, without a
registration statement having been filed or being in effect with the Commission as
to such securities.
98.
By reason of the foregoing, Defendants violated and, unless enjoined,
are reasonably likely to continue to violate, Sections 5(a) and 5(c) of the Securities
Act [15 U.S.C. §§ 77e(a) and 77e(c)].
COUNT VIII
Unjust Enrichment
(Against Relief Defendant)
99.
The Commission repeats and realleges Paragraphs 1 through 76 of
this Complaint.
100.
As a result of Defendants’ fraudulent conduct described herein, and
as alleged in Paragraphs 23, 26, 49, and 65 through 76 above, TSS obtained investor
funds without a legitimate claim to those funds. Under those circumstances, it is
not just, equitable, or considerable for TSS to retain the funds. TSS was unjustly
enriched.
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RELIEF REQUESTED
WHEREFORE, the Commission respectfully requests the Court find
Defendants committed the violations alleged, and
A.
Permanent Injunction Against Defendants
Issue Permanent Injunctions enjoining Defendants from violating Sections
5(a), 5(c), and 17(a) of the Securities Act [15 U.S.C. §§ 77(e)(a) and (c); § 77q(a)]; and
Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Exchange Act Rule 10b5 [17 C.F.R. § 240.10b-5] thereunder.
B.
Conduct-Based Injunction Against Mendenhall and Vaughn
Issue Conduct-Based Injunctions enjoining Mendenhall and Vaughn from
directly or indirectly, including, but not limited to, through any entity owned or
controlled by Mendenhall or Vaughn, respectively, from participating in the
issuance, purchase, offer, or sale of any security; provided, however, that such
injunction shall not prevent Mendenhall or Vaughn from purchasing or selling
securities for each of their respective own personal accounts.
C.
Disgorgement and Prejudgment Interest Against Defendants and
Relief Defendant
Issue an order directing Defendants and Relief Defendant to disgorge all illgotten gains or proceeds received with prejudgment interest thereon, resulting
from the acts and/or courses of conduct alleged in this Complaint, pursuant to
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Sections 21(d)(3), (d)(5), and (d)(7) of the Exchange Act [15 U.S.C. § 78(d)(3), (5),
and (7)].
D.
Civil Monetary Penalties Against Mendenhall and Vaughn
Issue an order directing Mendenhall and Vaughn to pay civil money
penalties pursuant to Section 20(d) of the Securities Act [15 U.S.C. § 77t(d)] and
Section 21(d) of the Exchange Act [15 U.S.C. § 78u(d)].
E.
Officer and Director Bar Against Mendenhall and Vaughn
Issue an order pursuant to Section 20(e) of the Securities Act [15 U.S.C.
§ 77t(e)] and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 78u(d)(2)],
permanently prohibiting Mendenhall and Vaughn from acting as an officer or
director of any issuer whose securities are registered with the Commission
pursuant to Section 12 of the Exchange Act or which is required to file reports with
the Commission pursuant to Section 15(d) of the Exchange Act.
F.
Further Relief Against Defendants and Relief Defendant
Grant such other and further relief as may be necessary and appropriate.
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VII. DEMAND FOR JURY TRIAL
The Commission hereby demands a trial by jury on any and all issues in this
action so triable.
Dated: July 29, 2026
Respectfully submitted:
By: /s/ Russell Koonin
Russell Koonin
Acting Supervisory Trial Counsel
Fla. Bar No. 474479
Direct: (305) 982-6390
Kooninr@sec.gov
Lead Counsel
Michael Mikulic
Trial Counsel
Fla. Bar No. 125073
Direct: (305) 982-6353
Mikulicm@sec.gov
Attorneys for Plaintiff
SECURITIES
AND
EXCHANGE
COMMISSION
801 Brickell Avenue, Suite 1950
Miami, FL 33131
Telephone: (305) 982-6300
39
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.