FuelFood: A High Risk Deal For the AgesJune 19, 2015 | By: Sean Murray
- Fuel Food business partner Paul Schumack was sentenced to 12 years in prison in March 2016
- Several other merchant cash advance companies continued to give FuelFood money throughout the rest of 2015, according to UCC filings
- The company currently has an ‘F’ rating with the Better Business Bureau
- Erik Leander is still running the company, according to the Florida Secretary of State
It’s a deal for the record books. CNBC’s The Profit, ABC’s Shark Tank, the Securities and Exchange Commission, and several merchant cash advance companies crossed paths in a health food business grossing $250,000 a month. West Palm Beach-based FuelFood (Fuel Foods Inc) was slated to receive an investment of $300,000 from Marcus Lemonis during an episode of The Profit that aired on June 16th. You won’t believe what happened next…
FuelFood is operated by former professional boxer Erik Leander who runs his business through intimidation. A textbook tough guy, at least one senior employee quit during the filming of the show. Leander even appeared to physically threaten Lemonis when the deal fell through at the end.
But that’s how it wrapped up. Here’s how it started:
FuelFood’s financial statements appeared on camera. Do you recognize two of the names under the payables?
Two of the company’s biggest obligations are receivables due to be delivered to Snap Advances and Pearl Capital.
Enlarged on the screen, the balance with Snap Advances is $178,000 (Thanks to Shapour for alerting me to this episode.)
And here’s the problem, the merchant is having trouble making payroll while appearing to have spent a significant amount on a monster truck. In the episode, Lemonis has difficulty understanding where all the money went especially considering the food service business lacks basic kitchen supplies. But despite these misgivings and Leander’s management style (reign of terror), he offers $300,000 in return for 51% of the business. $200,000 of that would be used to buy out Snap Advances and Pearl Capital and the remaining $100,000 would be available to use as working capital.
It’s not a great deal and it means relinquishing control of the business, concessions Leander seems almost too willing to accept. Of course before the check is cashed, Leander reveals there are six other partners in the business, all of whom will need to sign off on a proposed buyout.
Lemonis says that without consent from all of the partners, regardless of how small they are, there will be no deal.
Leander is unable to produce shareholder agreements and stalls on getting their approval. When Lemonis pushes to find out what’s going on, he discovers that one of the shareholder’s assets are being placed in receivership.
Worried that a bankruptcy in the partnership could put FuelFood at risk, he demands to know just how small this shareholder is. Leander confesses that the guy owns a measly 46% of the business, an immaterial amount that should have basically no bearing on anything because he hasn’t heard from the guy in a long time.
Outraged, Lemonis performs a basic google search and learns this major business partner, Paul Schumack, is being charged by the SEC for running a massive ponzi scheme that bilked millions of dollars from investors, hence the receivership.
With the truth revealed, Lemonis realizes that nearly half of FuelFood’s assets are now potentially owned by the SEC, who would likely liquidate assets to make investors whole.
Lemonis tells the camera the deal’s off, but for another TV star the news comes too late. Shark Tank’s Barbara Corcoran received $200,000 to promote one of Schumack’s mobile apps, Gee-bo. Corcoran allegedly had no plans to return the money but may be forced to if those funds are believed to be investor proceeds.
In the show, FuelFood’s Leander is unapologetic and claims he not only doesn’t care about his crooked partner or ruinous predicament, but that Lemonis better fork over the $300,000 he promised. He topped it off with a veiled threat of physical harm.
The Profit’s TV star manages to escape the tense standoff and the business appears doomed.
Curiously, the show’s closing notes reveal that the business is still open despite the apocalyptic situation they were in months ago during filming.
But will it last?
FuelFood is being pummeled on Yelp, with several customers calling the product and service an outright scam.
And in the United States v. Paul Schumack (and other co-defendants), a January, 2015 court document states that $779,000 of stolen investor money is alleged to have flowed through to FuelFood.
As the business likely counts down its last days, public UCC filings show that the company took on an additional merchant cash advance in April. Worse yet, on June 17th, the day after the disastrous episode revealed that Erik Leander was not the sole owner and that the company was embroiled in a ponzi scheme and potential receivership, they managed to obtain yet another merchant cash advance.
Florida state records show that Knight Capital filed a UCC against FuelFood on June 17th, 2015.
On twitter, Lemonis asked his fans a valid question:
Do you think this is the craziest episode ever?? #TheProfit
— Marcus Lemonis (@marcuslemonis) June 17, 2015
What’s crazy is that they’re still getting funded…
—–Last modified: August 16, 2016
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.