A Port Richey-based real estate investment trust and its founders are under fire for allegedly swindling $5 million from a $152 million real estate fund and spending it on expenses like jets, jewelry, gun ranges and adult nightclubs.
The SEC filed charges on July 29 in the U.S. District Court for the Middle District of Florida in Tampa against RAD Diversified REIT, Brandon “Dutch” Mendenhall and Amy Vaughn, who are accused of defrauding small investors.
According to the SEC’s complaint, the REIT allegedly raised the funds from more than 5,500 investors across the country through unregistered securities offerings between November 2019 and March 2024 while falsely portraying the company as profitable and backed by rental income and appreciating properties.
Regulators allege Mendenhall and Vaughn duped investors on a business built around buying, renovating and renting homes 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.
The complaint says the duo promoted their business with Christian values, patriotism and helping military veterans and marketed themselves through social media, podcasts, seminars and a 60-person internal sales force. The company’s Instagram account used the handle @redefinedamericandream and carried the tagline, “We’re a cultural and financial shifting of consciousness for Americans. If you don’t love this country, go somewhere else.”
Mendenhall allegedly used investor money to pay $691,000 in IRS tax obligations, transfer $1.4 million to personal accounts, pay a nanny $75,000 and rack up nearly $197,000 in American Express charges. Those purchases allegedly included more than $50,000 at a custom clothier, nearly $50,000 at jewelry stores and purchasing gift cards, rounds of golf, bowling outings, gun-range fees and adult nightclub services.
According to the complaint, Vaughn transferred $1.5 million to personal accounts while charging investor-funded accounts for more than $214,000 in private jet travel, roughly $173,000 on luxury clothing and accessories, $80,000 at jewelry stores, $40,000 at adult nightclubs and thousands more on Ticketmaster purchases, luxury car expenses, private school tuition, pet care and a pawn shop.
The founders allegedly encouraged investors to tap retirement accounts, home equity loans, credit cards and life insurance proceeds to invest in the REIT, while assuring them that “zero investors have ever lost money.” The SEC alleges many of the investors were not accredited, meaning their net worth likely is less than $1 million not including primary residences.
The complaint alleges Mendenhall and Vaughn raised about $104 million through REIT stock offerings, $23 million through “hard money loan” notes promising 20 percent returns, and $16.5 million through joint venture real estate investments marketed to members of the company’s “inner circle” investment club. Membership in the club was promoted as requiring a $50,000 buy-in for access to exclusive deals, though the SEC alleges the defendants often accepted far less.
RAD Diversified allegedly lost at least $31 million in 2022 and $22 million in 2023, while annual rental income never surpassed $5 million. Internal financial records allegedly showed the company depended on new investor money and financing to cover operating expenses. In 2023, a bank allegedly rejected the company’s request for a $15 million line of credit, saying it was repeatedly losing $20 million annually and relying on equity raises to survive.
The SEC also alleges the company falsely touted a steadily rising share price, claiming it had climbed from $10 to $25.04 between 2019 and 2023 based on independent third-party property valuations.
Instead, the valuations were prepared by Mendenhall’s brother, the company’s vice president of real estate operations, who lacked appraisal experience and relied on online estimates rather than professional valuation standards, regulators allege. The complaint also alleges the company understated mortgage debt by tens of millions of dollars when calculating its net asset value and stopped updating the share price after July 2023 despite a wave of foreclosures affecting its properties.
By early 2024, RAD Diversified allegedly faced at least 166 foreclosure actions totaling about $47 million. The company and four affiliates filed for Chapter 11 bankruptcy in March, placing more than 300 properties under court supervision.
Investors were allegedly told they could redeem their shares after following company procedures, but the SEC says redemption requests were routinely delayed or denied because the company lacked sufficient liquidity. The company froze redemptions in February 2024 with at least $3 million in outstanding requests, according to the complaint.
Some of the most eye-catching allegations involve how investor money was spent.
The SEC alleges Mendenhall and Vaughn diverted roughly $54 million of investor funds into accounts belonging to The Seminar Solution, another company they owned. From there, Mendenhall allegedly misappropriated at least $2.3 million and Vaughn another $2.5 million for personal expenses.
The SEC alleges that while the pair publicly claimed they had deferred their salaries and management fees to help the struggling company, they were using investor funds to finance their lifestyles.
The agency is seeking a trial by jury, permanent injunctions, disgorgement of allegedly ill-gotten gains, civil penalties and banning Mendenhall and Vaughn from serving as officers or directors of companies. Russell Koonin and Michael Mikulic are the SEC lawyers who submitted the complaint.
RAD Diversified REIT’s attorney Matthew Fornshell and Vaughn’s attorney Paul Sisco did not immediately respond to requests for comment. Mendenhall’s attorney for the SEC case could not be reached.
The state of Florida is looking into the case as well.
Florida Attorney General James Uthmeier issued subpoenas earlier this month to RAD Diversified REIT, its subsidiaries and owners over allegations they violated Florida’s Deceptive and Unfair Trade Practices Act. The attorney general is seeking communications with customers and investors, investor complaints, offering and marketing materials, operational and training manuals, banking and financial records and other documents detailing the REIT’s shareholders and holdings.
Mendenhall was indicted by a Tampa grand jury in May on a federal mail fraud charge alleging he submitted false information on a mortgage application to obtain financing for a $1.6 million home at 4604 Clarksdale Lane in Brandon.
Mark Rankin, the attorney representing Mendenhall in the criminal case, refuted that charge. If convicted, Mendenhall faces up to 20 years in prison. Vaughn is not facing any criminal charges.
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