RCI Hospitality (RICK) Faces Class Action Over Tax Fraud Indictment - Strip Club Operator Under Fire
Strip club empire RCI Hospitality hits legal turbulence as shareholders file class action lawsuit following tax fraud indictment.
Legal Fallout Accelerates
The adult entertainment conglomerate faces mounting pressure as investors seek damages over alleged financial misconduct. The indictment triggers automatic trading restrictions while regulatory scrutiny intensifies.
Corporate Governance Under Microscope
Board members confront tough questions about oversight failures as stock volatility spikes. Internal controls now face forensic examination by federal investigators and plaintiff attorneys simultaneously.
Market Reaction and Sector Implications
Hospitality stocks show mixed response while legal experts predict protracted courtroom battles. The case highlights how traditional entertainment ventures still can't outrun basic accounting transparency requirements—even with creative bookkeeping.
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On Sunday, investor rights law firm Rosen Law announced the lawsuit, alleging that RCI concealed the involvement of its executives in bribery to cover up their tax fraud activities. The class action covers the period December 15, 2021, to September 16, 2025.
The investor group argued that RCI and its executives “understated the legal risk facing the company” and provided “materially false” statements about its business, operations, and prospects. As a result of these, “investors suffered damages,” when “the true details” became public, Rosen said in a statement.
RCI Denies Tax Fraud
The class action comes several days after RCI Hospitality, which also operates nightclubs, sports bars, and restaurants, was hit with $8 million in tax fraud charges by the New York Attorney General. The indictment covers five of RCI’s executives and three of its strip clubs in Manhattan — Rick’s Cabaret, Vivid Cabaret, and Hoops Cabaret and Sports Bar.
In a 79-count indictment, Attorney General Letitia James alleged that the executives between 2010 and 2024 “shamelessly” bribed a sales tax auditor with New York’s Department of Taxation and Finance to avoid paying over $8 million in sales taxes to the city. They allegedly gifted at least 13 complimentary multi-day trips to Florida to the auditor.
During these trips, the auditor allegedly received up to $5,000 per day for private dances at RCI-owned strip clubs, including Tootsie’s Cabaret in Miami. Additionally, the executives are said to have covered the auditor’s hotel stays and restaurant expenses during these visits.
However, RCI, in its response, called the indictment “baseless”. The company and its execs vowed to “take all necessary action to defend themselves against these overreaching charges” while still striving for a fair resolution.
RCI Battles Fall in Sales
The indictment comes at a tough time for the strip club operator, which saw its revenue fall by $5 million during its recent Q3 2025. The number dipped from $76.2 million during the same period a year ago.
Building on this, RCI’s same-store sales—revenue from outlets that have been open for at least a year—slid 13.5% during the recent quarter for its military-themed sports bar and grill outfits called Bombshells. Additionally, RCI’s nightclub revenue dipped by 3.7% compared to the previous year, reaching $62.3 million. The company attributed the fall to weaker same-store sales and the effects of a fire at Texas-based adult nightclub Baby Dolls Fort Worth.
What Is the Price Target for RICK Stock?
RICK’s shares have limited coverage from Wall Street analysts. However, TipRanks’ AI Stock Analyst holds a Neutral rating on RICK stock, with a score of 62 out of 100. Moreover, the average RICK price target is $30.00, which indicates a 10% upward potential.
