Cambridge bicycle shop forced into bankruptcy over years of debts and bikes it never delivered during the pandemic
News from bicycle retailers and the industry reports a federal bankruptcy judge in Boston has appointed a trustee to oversee CrimsonBikes’ Chapter 11 bankruptcy on Massachusetts Avenue in Cambridge as it seeks to deal with three creditors – an e-commerce provider, a non-profit developer based in Boston and a customer who prepaid for a bike he says he never had.
The store owner also alleges that he owes him several hundred thousand dollars in rent arrears.
SmartEtailing, of Broomfield, CO, which sets up online stores for bicycle retailers, and Community Builders, a Boston-based nonprofit, had initially sought to force CrimsonBikes out of Chapter 7 bankruptcy, which would have dissolved the business completely, but a judge agreed with the retailer to convert the case to Chapter 11, under which it has a chance to reorganize and stay in business. The judge appointed a Boston attorney as a trustee to review CrimsonBikes’ finances and make recommendations to the judge on how to reorganize the business.
Bicycle retailer reports Chapter 7 case arose a federal SmartEtailing lawsuit filed last year, alleging that CrimsonBikes responded to the growing number of customer refund requests online, after the store was unable to fulfill their orders as the pandemic plunged the bicycle market into chaos, telling them to submit claims to their credit card companies, rather than sending them refund their money.
SmartEtailing alleged that CrimsonBikes – named after the Harvard dorm where owner Chales James had the idea for the business – even provided letters to some customers so they could request refunds from the credit card companies . Due to the nature of its contract with a credit card processing company, SmartEtailing was then billed by the credit card companies to clear some of the payments – around $ 400,000, SmartEtailing alleges.
In April, some 76 online customers had filed complaints with the Better Business Bureau, reports Cambridge Day.
CrimsonBike accuses SmartEtailing of being to blame, locking its account amid “unprecedented service and supply chain disruptions due to the COVID-19 pandemic” and so it was unable to reimburse customers.
Locking down their ordering system made it nearly impossible for CrimsonBikes to issue refunds to customers who chose not to wait for their bikes or fulfill pending customer orders. Through the diligent efforts of CrimsonBikes, they were able to recreate many of their records and issue appropriate refunds or fulfill customer orders. SmartEtailing’s actions in locking CrimsonBikes out of the online system without notice constituted a breach of contract between the parties, which was committed in bad faith and caused substantial damage to CrimsonBikes.
But creditors are instructing CrimsonBikes to stop paying its bills long before the pandemic. The Community Builders, a Boston-based nonprofit that builds housing and rents commercial space in certain neighborhoods, has joined the Chapter 7 petition for more than $ 200,000, that CrimsonBikes owe it a failed attempt. to open a second retail store in a building the group owns at 390 Western Ave. at Allston in 2017.
The nonprofit alleges that CrimsonBikes stopped paying its rent towards the end of the year and failed to pay the contractor it hired to build the space, according to a complaint filed by the non-profit organization against CrimsonBikes in Suffolk Superior Court. The contractor then obtained a “mechanic’s lien” against Community Builders for the work. The Community Builders ended up paying the contractor $ 200,000 and in 2019 took legal action to get his money back. The case remains open.
Also looking for money: the owner of the bike shop in Cambridge, who says he owes some $ 600,000 and counts the rent back on the Mass Avenue site. The owner was not among the petitioners seeking to dissolve CrimsonBikes, but a customer – who prepaid for a bike he never uses – is.
Details of Allegations by SmartEtailing (1.4M PDF).
Crimsonbikes Responds to Bankruptcy Request (287k PDF).
Details of Cambridge Owner’s Allegations (689k PDF).
Details of Community Builders’ Allegations in Suffolk Superior Court (287k PDF).