The claim
Strip the marketing back and the offer is the oldest one in this category: real estate is the reliable passive asset, but it is illiquid and it is work. Buy into a pooled fund instead, and you get the rent without the tenants, the toilets, the mortgage broker or the closing table. Someone competent does the operating. You receive a dividend.
We should steelman this properly, because unlike most claims we autopsy, this one describes a legitimate financial product. Non-traded REITs are real. Pooling capital to buy income property is sound. Rent is genuinely passive to the passive partner. There is no structural reason a fund like this cannot work, and plenty of them do.
The claim under examination is therefore narrower and sharper than usual. It is not “can real estate be passive income” — it can. It is whether the specific numbers presented to these investors described the business they were actually buying into.
The evidence
Every figure below is an SEC allegation from the 29 July complaint unless explicitly marked otherwise.
Exhibit one: the gap between the story and the ledger. The SEC alleges RAD Diversified reported net losses of roughly $31 million in 2022 and roughly $22 million in 2023, while marketing to investors on the basis of profitability and consistent returns. If accurate, investors were buying into a growing loss and being shown a growing yield.
| Alleged figure | Amount |
|---|---|
| Raised from investors (Nov 2019 – Mar 2024) | approx. $152,000,000 |
| Number of investors | more than 5,500 |
| Alleged net loss, 2022 | approx. $31,000,000 |
| Alleged net loss, 2023 | approx. $22,000,000 |
| Properties lost to foreclosure | 166, approx. $47,000,000 |
| Allegedly diverted to an affiliated entity | approx. $54,000,000 |
Exhibit two: who priced the shares. This is the allegation we would put at the centre of the case. A non-traded REIT has no market to set its price, so the share value investors see is produced internally. The SEC alleges that RAD’s share price was determined with the involvement of the chief executive’s brother — a person the complaint describes as having previously worked in a restaurant and as holding no appraisal credentials.
If that is accurate, the number investors used to decide whether they were up or down was not an independent valuation. It was a house number. For an asset class whose entire appeal is that the value is real and tangible, that is the whole ballgame.
Exhibit three: the exit closed. The SEC alleges 166 properties, worth roughly $47 million, went to foreclosure, and that in February 2024 the fund froze redemptions — the mechanism by which an investor gets their money back. A passive income vehicle that cannot be exited is not a yield product; it is a holding pen.
Exhibit four: where money is alleged to have gone. The complaint alleges roughly $54 million moved to an affiliated entity, and that funds were used for private jet travel, jewellery, and the founders’ personal tax liabilities. Alleged, itemised in a pleading, untested.
Exhibit five: the part that is not an allegation. RAD Diversified filed for Chapter 11 bankruptcy protection on 1 March 2026. That is a matter of public court record, independent of anything the SEC claims. Separately, Mendenhall was indicted on 1 June 2026 in a federal criminal matter announced by the US Attorney’s Office for the Middle District of Florida — a distinct case concerning false information in a property purchase, not the REIT scheme in the SEC complaint. It is pending, and an indictment is an accusation, not a conviction.
What the evidence supports, and what it does not
What it supports. That a federal regulator has examined this fund and alleges the reported performance did not match the operating reality. That the company is in Chapter 11, which is verifiable and not in dispute. And that a structural weakness exists in the product category itself: when a fund is non-traded, the share price is an assertion by the people selling the shares. That is true of every non-traded REIT, honest or otherwise, and it is the thing an investor in one should be hardest-nosed about.
What it does not support. It does not support calling anyone a fraudster. No court has found liability, no defendant has answered the complaint, and the SEC has not stated a penalty or disgorgement figure. It does not support treating the criminal indictment as related to the fund — it is a separate matter about a property purchase. It does not support any claim about what the defendants say in response, because we found no response and will not invent one. And it emphatically does not support “real estate investment is a scam.” Most of it is not.
The transferable lesson is narrower and more useful than a verdict. In any pooled investment sold on passive income, three questions do most of the work, and all three are askable before you wire anything. Who sets the price of my shares, and what are their credentials? Under what conditions can I get my money out, and who can suspend that? And do the audited financial statements show a profit consistent with the distribution I am being paid?
The third question is the sharpest, because a distribution paid out of new investor capital and a distribution paid out of operating profit look identical in your account. They only diverge later, and by then the redemption window is the thing that matters.
Cause of death: pending autopsy. As with our last entry, this docket stays OPEN. The subject is on the table, the SEC has made the first incision, and a complaint is one side of a story. We would rather leave an entry open for a year than book a conviction that never arrives.
What would change this verdict
- A defendant’s answer to the complaint. The first real test of these allegations, and the first time the other side of the numbers appears on the record.
- A judgment on the merits, or a settlement with agreed facts. Either converts allegation into finding and moves this entry off OPEN.
- An independent valuation of the share price for the relevant years. The internal-pricing allegation is the spine of the case; a credible outside appraisal supporting the reported figures would remove it.
- A Chapter 11 outcome that returns capital. The bankruptcy is the one live process that could still make investors substantially whole, and it is running independently of the SEC action.
We publish our own numbers on how this site makes money for the same reason we insist on these questions: the standard is only worth anything if it applies to us too.