A federal judge has forced an Indiana pickleball apparel and equipment entrepreneur into bankruptcy after investors testified they had no confidence in repaying the loan.
Judge Robin L. Moberly on Wednesday granted a creditor's motion to initiate a Chapter 7 involuntary bankruptcy case against Rodney “Rocket” Grubbs of Brookville. Grubbs persuaded hundreds of people from across the country to provide loans in exchange for short-term, high-interest investment opportunities with his company, All About Pickleball LLC, doing business as Pickleball Rocks. accused of suspicion.
As part of the bankruptcy case, Moberly plans to appoint a trustee to take over Grubbs' assets and decide what can be sold to potentially help creditors recover their funds.
more:Pickleball apparel CEO, dubbed the sports world's “ultimate ambassador,'' accused of pyramid scheme
Separately, the Indiana Secretary of State's Securities Bureau issued a cease-and-desist order against Grubbs for issuing bearer promissory notes for financing. Grubbs told the court he immediately complied with the order.
Several of Mr. Grubbs' investors traveled to Indianapolis from other states, including Florida, Kansas, Ohio and North Carolina, to attend the hearing. Some came from all over Indiana. They all accused Mr. Grubbs of allegedly running a Ponzi scheme, an allegation he denies.
Rejected investors typically met Mr. Grubbs, described as personable and friendly, at pickleball tournaments, where he participated as a player and promoted the business. They allege that he solicited money from them under the pretense that they were one of a small number of exclusive investors, and in some cases solicited additional funds before repaying previous loans. There is.
They now claim Grubbs ignored text messages, emails and other requests for their money back and failed to repay the loans when they were due.
In court Wednesday, multiple investors testified that Mr. Grubbs sought loans, typically $25,000, to buy inventory or to repay others who cashed out their investments in his companies. If they are unable to make repayments, the judges said they will accelerate the loan or require additional investment.
Joe Gilmore, a former commodity trader from Tennessee, testified that he considered Grubbs a friend. Mr. Grubbs and his family had even stayed at his home several times during trips to pickleball events. Mr. Gilmore said he invested in Pickleball Rocks because Mr. Grubbs told him that another investor was withdrawing money and that he needed to pay for his adult child's wedding. Gilmore said after the hearing that he owes a total of $50,000.
Jennifer Butler of Florida testified that she had four promissory notes totaling $90,000.
“He wouldn't answer,” Butler testified.
Investors also said Grubbs continued to solicit new investors despite its pattern of defaults.
Mr. Grubbs appeared at the hearing without an attorney. In his opening statement in court, Grubbs said he was acting as legal representative in the state's securities investigation and that his attorney, identified as Paul Bink of Bose McKinney & Evans in Indianapolis, He explained that he advised him not to answer questions about personal loans. Grubbs said Bink is not representing Grubbs in the bankruptcy case. IndyStar reached out to Vink to confirm Grubbs' claims, but he did not immediately respond.
Early in the hearing, Mr. Grubbs asserted his Fifth Amendment rights in response to any questions about his personal loans. Later, under cross-examination by Indianapolis attorney Matt Foster of the Foster Law Firm, he answered more questions than he initially asked.
Grubbs testified that his bank account was empty and that he was two months behind on his mortgage. When questioned by Mr Foster, Mr Grubbs did not dispute that he owed the money. He also told the court that he had “borrowed” large sums of money for the “project”. Asked by IndyStar after the hearing about the nature of those projects, Grubbs declined to say what they were. But his debts date back to 2005, he said.
In response to Mr. Foster, Mr. Grubbs acknowledged signing a promissory note submitted to the court as evidence and stated that Pickleball Rocks never had more than two independent contractors and employees. Ta. He also acknowledged failing to appear in three civil lawsuits filed by investors in Franklin County. These lawsuits resulted in a default judgment against him of more than $9 million.
Grubbs reasserted the Fifth Amendment when asked what happened to investor financing.
“There's a lot of people involved in it,” he said. “It goes back a long time.”
Grubbs argued both in his response to the petition and in open court that he should not be forced to sell Pickleball Rocks at this time. He said investors could make more if they waited, and told the judge the brand was his most valuable asset. He also said 2023 sales are estimated at $367,000, but if Pickleball Rocks is acquired by a new owner, that value will increase in the future given the sport's rapidly growing popularity. . Mr. Grubbs said that with the right management, the company could reach $1 million in 36 months, and that investors could earn even more if they waited.
Moberly didn't move. The judge told Grubbs that she was not buying his “sales talk.”
Foster said Grubbs used his connections and friendships in the pickleball world to find investors. What bothers Foster is that many people are dipping into their retirement accounts and savings accounts to help his pickleball locs grow. Another invested his child's college funds. The attorney said he spoke to someone who had a promissory note dating back to the 1990s. He also had investments in real estate.
Mr Foster said Mr Grubbs had no remorse and added: “He is a sociopath.”
The incident landed in Foster's lap in early December. This is my first time going bankrupt. Foster said he had 135 customers as of Wednesday morning and had raised concerns with federal authorities over the use of wire transfers and potential tax issues. He is in an unusual position, attorney Wayne Gleason of the Wayne Gleason Law Offices in Connersville said after court. He not only represents clients involved in bankruptcy cases, but also victims.
Gleason said he played pickleball with Grubbs at least once a week for years in the Brookville area. Mr. Grubbs approached him with an investment, and he loaned him $25,000. He also hasn't been paid back yet.
“I considered him a friend, so I just gave it to him,” Gleason said.
It is unclear how many creditors Grubbs has. He told the judge Wednesday that the number is about 265. But given his extensive solicitation of investors, some people are still investigating the allegations against Grubbs and may come forward, the lawyers said.
Foster expects the court to set a deadline for creditors to file claims. He said secured creditors would be first in line for repayment. Most of the promissory notes are unsecured loans, meaning Grubbs has not posted any security other than a promise to pay interest and penalties in the event of default.
After the hearing, Grubbs told IndyStar that he did not use the investment funds for personal gain. He said he didn't buy a boat, a luxury car or any other material things. He declined to say why he recruited multiple investors for his commercial company, saying fraud allegations need to be handled more carefully and denying the Ponzi scheme.
“There's nothing illegal about using their money to pay someone else back. That's what I used the money for,” he said.
But Foster called it a “textbook pyramid scheme.”
Contact IndyStar investigative reporter Alexandria Burris at [email protected]. Follow her on X (formerly Twitter). @alyburris.
