Revisiting My Articles On The Alternative Finance Industry - 5 Years Later

Five years ago, I wrote a series of Seeking Alpha articles about the alternative finance industry, which provides financial services to customers who have trouble accessing them from traditional sources. This series was inspired by Gary Rivlin's book about the industry, Broke, USA. In those articles, I considered topics relevant to an investor in the industry, such as competition, regulation, and future growth.

Much has changed in the industry since then. Some products, such as payday lending, have become less popular, while others have grown. The regulatory climate has changed. Thus, I wanted to revisit my original articles to see if their conclusions were born out by subsequent events. (Read More)

Whatever Happened to RecMed?

Back in May 2016, various news outlets ran stories about 14-year old entrepreneur Taylor Rosenthal. Rosenthal turned down a $30 million offer from “a major healthcare company” to buy his startup RecMed, a company that planned to make vending machines for first-aid equipment. Various news outlets, including CNBC, CNN Money, and Fox Business, wrote about this buyout offer and how Rosenthal also already had an order from Six Flags for 100 of the machines.

I ran into one of these articles earlier today, and I wondered how the story turned out. Googling “RecMed” provided surprisingly little information, including not even a company website. This made me suspect that things had not gone quite as expected.

As it turned out, Taylor Rosenthal was just one of many people to be taken in by Kyle Sandler, a scam artist who targeted Rosenthal’s hometown of Opelika, Alabama, a suburb of Auburn. According to an Associated Press investigation, Sandler started a business incubator called the Round House and encouraged various locals to invest, before spending much of the $1.9 million in investment funds on himself. It helped that while Sandler was in Opelika, he made friends with John McAfee, the founder of the namesake security firm, who had also moved to Opelika at the same time. This friendship made Sandler seem more credible. (If you’re wondering about the seemingly implausible coincidence of Sandler and McAfee just happening to run into each other in a small town in Alabama, apparently Opelika was Alabama’s “first ‘gig city’ with a high-speed fiber-optic network” and “provided an incentive of free internet service worth about $50,000.”)

In any case, Sandler convinced Taylor Rosenthal and Rosenthal’s family to let him be their advisor on the RecMed idea. He then invented the offer from Six Flags and created a fake letter from Johnson and Johnson with the supposed $30 million buyout. He sent out fake press releases with this information, which inspired those articles above.

I found this story interesting because it’s common for news outlets to run unusual stories to draw attention, and I’ve always wondered how those stories turn out. (I’m apparently not the only one, given that I recently ran into a Cracked article titled “5 Viral Stories That Had Insane Twists After We All Moved On.”) I think the story of Taylor Rosenthal and RecMed is a particularly dramatic example of how there’s often more to these stories than you get to see in the news, and thus your first impressions of them might not always be correct.