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Lawsuit accuses Baltimore County entrepreneur of defrauding Rehab.com investor

A Baltimore-area businessman has been accused in a federal lawsuit of enticing investors with false promises and misusing his company’s money for lavish personal expenses.

The lawsuit claims that Patrick B. Nagle, the owner and CEO of Rehab.com, told investors he would convert the company into a C-corporation and launch Series A fundraising but then repeatedly refused to do so.

The plaintiff is the Ryan N. Rice 2018 Irrevocable Trust, which invested $1.5 million in Nagle’s company in 2019. Nagle’s goal for the business, based in Lutherville, was to create a one-stop website at Rehab.com where users could compare addiction treatment facilities.

The trust invested in the company based on Nagle’s representation that it was “cashflow positive,” according to the complaint. When the trust brought its total investment to $1.5 million, it agreed that the balance of the trust’s loan, after company expenses, would be converted into an equity investment that would result in a valuation of $12.5 million in company stock, the complaint alleges.

Nagle then spent about two years refusing to convert the company or begin Series A fundraising, the trust claims in the complaint. During that time, Nagle became increasingly erratic, relocated to Puerto Rico and lost $100,000 of company money in a cryptocurrency scam, according to the complaint. He ultimately returned to Baltimore but continued his erratic behavior, including being verbally abusive toward the company’s employees, the trust wrote in the complaint.

A review of Rehab.com’s books in 2022 also revealed that Nagle had misused funds invested by the trust to pay for his own personal expenses, the complaint claims. Nagle is accused of spending $1.7 million in company money on personal vehicles, extended hotel stays and gambling.

“This course of spending demonstrates that Nagle never intended to create a profitable business with equity opportunities for the Trust,” an attorney for the trust, Michael E. Blumenfeld, wrote in the complaint.

“Rather, Nagle intended to create a business in which he could string the Trust and other investors along with intermittent promises so that he could continue to extract investments and use those funds to pay for his personal expenses and lifestyle, while retaining sole control over all company assets, and hiding his misdeeds by refusing to convert the company into a C-corporation and engage in Series A fundraising.”

The lawsuit asks a federal judge to void the trust’s agreements with Nagle’s company and order the return of the trust’s investment with interest. It also asks that Nagle be prohibited from using company funds for personal expenses and claims that Rehab.com is insolvent.

“The Trust now brings this action to protect its investment in Rehab.com and protect Rehab.com itself, which has the potential to help millions of people if its funds are properly directed at initiatives that benefit the business rather supporting Nagle’s lavish personal spending and extravagant lifestyle,” Blumenfeld wrote.

Blumenfeld did not return a phone message seeking comment Monday.

Nagle could not be reached for comment for this story. A phone number listed for Rehab.com was not working Monday, and an email to the company’s general account was not returned.

In an interview with Forbes.com in 2017, Nagle claimed that he realized the need for Rehab.com after he tried to get help dealing with his alcohol addiction. Nagle, who is credited with buying the popular Rate My Professors website at age 23, told Forbes his goal for Rehab.com was to “Save 1 million lives by 2020.”