A class action lawsuit was filed against RCI Hospitality (RICK) on September 21, 2025. The plaintiffs (shareholders) alleged that they bought RICK stock at artificially inflated prices between December 15, 2021, and September 16, 2025 (Class Period) and are now seeking compensation for their financial losses. Investors who bought RCI Hospitality stock during that period can click here to learn about joining the lawsuit.
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RCI Hospitality’s subsidiaries own and operate adult nightclubs, sports-bar restaurants, and other supporting products and services.
The company’s tax misrepresentations and its role in a major, multimillion-dollar criminal tax fraud and bribery scheme are at the heart of the current complaint.
RCI’s Misleading Claims
According to the lawsuit, RCI and two of its senior officers (the Defendants) repeatedly made false and misleading public statements throughout the Class Period. In particular, they are accused of omitting truthful information about the company’s legal risks stemming from alleged tax fraud and bribery, from SEC filings and related material.
In an annual report published at the beginning of the Class Period, RCI stated that it had created comprehensive policies to ensure that each of its nightclubs follows all local, state, and federal laws.
In another annual report filed on December 16, 2024, RCI noted that the New York Attorney General (NY AG) and the New York Department of Taxation and Finance (NY DTF) had searched its Houston headquarters and three New York clubs, and had also sent a subpoena asking for documents and information about some clubs in New York and Florida.
In the same annual report, the company mentioned that it had put a non-executive employee on leave during the pendency of an internal review. RCI also noted that it was unclear whether the taxation investigation would lead to any fines, penalties, or liabilities.
However, subsequent events (detailed below) revealed that the defendants had understated the legal risk facing the company from the ongoing tax investigation and had also committed bribery to cover up the fact that they committed tax fraud.
Plaintiffs’ Arguments
The plaintiffs maintain that the defendants deceived investors by lying and withholding critical information about the company’s business practices and prospects during the Class Period. Importantly, the defendants allegedly misled investors about the ongoing tax probe by the NY AG and NY DTF and the legal risks involved with the same.
The information became clear in an announcement posted by the New York State Attorney General’s Office on September 16, 2025. The announcement said that the state’s top prosecutor was informing the public about the indictments of senior executives at RCI Hospitality Holdings, Inc., which runs strip clubs nationwide, for their involvement in a large-scale criminal scheme involving tax fraud and bribery.
The announcement explained that an investigation by the Attorney General’s Office found RCI executives had bribed an auditor with the NY DTF to avoid paying more than $8 million in sales taxes to New York City and the state between 2010 and 2024. It added that a 79-count indictment had been unsealed, charging RCI, five executives, and three Manhattan clubs owned by the company with conspiracy, bribery, and tax fraud, among other offenses.
Following the news, RICK stock plunged nearly 16% on the same day and another 10.4% on September 17.
To conclude, the defendants misled investors about the extent of the tax fraud and the bribery to cover up the tax fraud, which led to legal implications. Due to these issues, RICK stock has lost 57.4% year-to-date.
