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BK Lobster Boiling Over With New Lawsuit and Investigation

Executives of the Brooklyn-founded seafood restaurant have been accused of a “Ponzi scheme,” an “undercapitalization scam” and “illegal deception.”

April 21, 2023 Haidee Chu, The City
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BK Lobster is on a knife’s edge as more investors have come forward with claims that the fast-casual seafood restaurant ripped them off.

The Brooklyn District Attorney’s fraud unit is now investigating complaints from investors of the restaurant chain, according to one woman who contacted the prosecutor’s office and is suing the chain over tens of thousands of dollars she alleges vanished.

According to its website, BK Lobster has “sold over 30 franchises, opened 14 locations in 5 different markets.” Yet the company founded in 2019 in its namesake borough, and with franchises in multiple states, is not yet an officially registered franchise operation in accordance with New York State law — even as multiple stores bearing its name have shuttered or cut ties with the franchisors.

In the meantime, one investor in a BK Lobster planned for Astoria, Queens, filed a lawsuit last month against the chain alleging “illegal deception” after the store folded before even opening its doors.

“This needs to be a Netflix, Peacock series,” Dara Bradley, a dental hygienist who filed the pending lawsuit regarding the Astoria location, told THE CITY. “It’s insane.”

The chain has been the subject of at least four lawsuits filed in New York State this year. Those suits include allegations that it had breached a contract, failed to pay rent, and failed to carry worker’s compensation insurance, according to court records reviewed by THE CITY.

As THE CITY previously reported, BK Lobster had already been the subject of at least 14 lawsuits in New York State.

One document from early April, filed by an investor named Terrance Dixon in a lawsuit initiated in November 2022, alleged that BK Lobster was a “Ponzi scheme” that had “induced over 50 investors and collected upwards of $2 million dollars with this scheme in multiple locations throughout the United States.”

Bradley, 45, filed her lawsuit in March alleging an “undercapitalization scam” by BK Lobster Franchise Systems LLC, as well as its CEO, Rodney Bonds, and one-time COO, Ed Williams. The “scam,” the complaint claims, cost her all of the $46,000 she put into an Astoria location that never opened.

She is seeking that sum back along with $460,000 in damages, alleging she was coerced into investing in a “business model that was engineered to fail,” according to her suit.

“At first I was trying to work with these people, and then just realizing how much they were scamming everybody,” Bradley told THE CITY in March. “It was just red flag after red flag after red flag.”

Bonds told THE CITY on Friday that he was not aware of the Astoria suit or, he said, many others aimed at BK Lobster.

In December, Bonds told THE CITY that Dixon “just wanted to make threats.” He also acknowledged then that he had not registered as a franchisor in accordance with New York State law but said he was “in the process” of retroactively doing so.

He declined to comment on Friday about where his franchise registration stood, or on Dixon’s allegations.

Williams, who is employed as a city sanitation worker, declined to speak to THE CITY on the record for this story.

He has previously described Bonds’ approach to BK Lobster as “Let’s build them fast, let’s get them open, let’s get them open, let’s get ‘em up, let’s get it open,” with the idea that “if we build enough BK Lobsters and open enough BK Lobsters, what’s gonna happen is that a big company is gonna basically Shark Tank us.”

‘You Won’t Be the Only One’

In a court document submitted in early April, Dixon alleged that “the operation specifically targets lower- and middle-income investors seeking investment opportunities specifically for their unfamiliarity in the operation of a business.”

BK Lobster’s executives, the complaint alleges, “formed a criminal enterprise” under the guise of an operational franchise to “lure in victims with a series of misrepresentations including profitability of the business and multiple locations opening rapidly to further the scheme.”

Bonds declined to comment on those claims, but noted that a Miramar, Florida location named in the suit is still “open and operating.”

Bradley, the Astoria investor who filed a separate suit, first heard of the food chain from a friend who explained there was “an opportunity to invest” and introduced her to the executives, according to court records.

Bradley told THE CITY that she had started investing in the business in May 2021 after seeing boasts on BK Lobster’s website and social media accounts about its supposedly explosive success  — and after the executives pitched her on the idea of creating “generational wealth” for her child by buying into what they said was their booming business. They also tried to convince her to get her friends and family to invest, she said.

“I’m sad to see [a] minorities, Black-owned business taking advantage of other minorities,” Bradley said, recalling that the executives had told her “not to worry about it” when she expressed reservations about whether she could balance the business opportunity with her dental job.

“They made it sound like they will be there for you, like ‘we have other people, that you won’t be the only one.’”

Bonds, who is named as a defendant in Bradley’s suit, told THE CITY that he was not involved with the Queens location beyond granting its owner the right to use the BK Lobster name with the store.

“With the Astoria location, that was not owned by myself nor my corporation. That was an independently owned entity,” Bonds said. “They were responsible for their own funding and how they operated it.”

Ongoing Investigations

Seven months after her initial investment, Bradley found out through a real estate agent in December 2021 that the Astoria BK Lobster venture had not been paying rent on its storefront, she told THE CITY.

Not long after that, Bradley said, she came to the conclusion that the Astoria location was “never going to open” and, according to court records, repeatedly requested a refund that never came.

The New York State Franchise Act, which aims “to prohibit the sale of franchises where such sale would lead to fraud or a likelihood that the franchisor’s promises would not be fulfilled,” requires companies issuing franchises to detail their organizational structure and finances, and provide “a statement of the terms and conditions of any financing arrangements.”

Halimah Elmariah, a spokesperson for New York Attorney General Letitia James, confirmed Thursday that BK Lobster now “has an application that our office is reviewing,” and that any penalty for previously failing to register would come after the completion of that review.

Meanwhile, Bradley told THE CITY she had submitted a complaint in January to the Brooklyn District Attorney’s office, where she said a detective told her that a “criminal investigation” is ongoing.

That detective, she recalled, told her “‘You’re not the only one that calls. We’ve had a number of complaints come in…it’s in the fraud unit right now.’”

Oren Yaniv, spokesperson for the Brooklyn District Attorney’s office, said “we cannot comment on investigations.”

THE CITY is an independent, nonprofit news outlet dedicated to hard-hitting reporting that serves the people of New York.

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