RCI Hospitality Stock (RICK) Plummets as Strip Club Operator Faces $8M Tax Fraud Allegations

RCI Hospitality's stock takes a nosedive after executives get slapped with massive tax fraud charges—proving once again that some businesses prefer creative accounting over actual innovation.

The $8 million allegation hits right as the market's craving transparency—not strip club financial gymnastics. RICK investors are now learning the hard way that not all revenue streams are created equal.

Who needs blockchain-level audit trails when you've got… whatever this is? Another day, another reminder that traditional finance still has a few tricks up its sleeve—or in this case, under the table.

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On Tuesday, RICK stock plummeted by nearly 16% following the disclosure of the charges. According to Letitia James, the New York Attorney General, the top executives between 2010 and 2024 “shamelessly” bribed a sales tax auditor with the New York’s taxation and finance department to escape paying over $8 million in sales taxes to the city.

In a 79-count indictment unsealed yesterday, James accused the executives of gifting at least 13 complimentary multi-day trips to Florida to the auditor. On the said trips, the auditor allegedly received up to $5,000 per day for private dances at strip clubs owned by RCI, including Tootsie’s Cabaret in Miami.

The executives also allegedly paid for the auditor’s hotels and restaurant visits during these trips. Furthermore, James accused Timothy Winata, RCI’s controller and accountant, of traveling to Texas on at least 10 different occasions since 2010 to bribe the auditor at three Manhattan strip clubs operated by RCI: Rick’s Cabaret, Vivid Cabaret, and Hoops Cabaret and Sports Bar.

“Winata was responsible for directly providing the bribes to the auditor and accompanied him on trips to RCI clubs,” the public prosecutor alleged. It added: “After one such trip in February 2022, the auditor texted Winata, ‘This was the best trip I had in Florida. The girls were very beautiful and nice…I hope we can have another trip before the summer'”.

RCI Slams Charges as “Baseless”

However, RCI has expressed its disappointment at the charges. In a statement issued via the New York-based law firm, Tannenbaum Helpern, RCI dismissed the indictment as “baseless.”

“RCI, the individuals involved, and the three clubs deny the allegations and will take all necessary action to defend themselves against these overreaching charges, while continuing to seek a just resolution,” the strip club operator said.

RCI added that as a public company, it operates on a policy of paying all “legitimate and non-contested taxes”, adding that all three New York City clubs remain open for business.

RCI Struggles with Sales

The charges come at a time RCI Hospitality is aiming to improve its business operations, even as recently offloaded underperforming restaurants. In its most recent Q3 2025, revenue dropped by $5 million to $71.1 million. This is down from $76.2 million during the same period last year.

The shortfall in revenue comes even as same-store sales from Bombshells, its military-theme sports bar and grill outfits, fell over 13.5% during the quarter. This sale refers to revenue from Bombshells that were opened at least in the last 12 months.

Moreover, revenue from RIC’s nightclubs also dropped by 3.7% year-over-year to $62.3 million. It attributed the fall to poorer same-store sales and the impact of a fire at Baby Dolls Fort Worth, an adult nightclub in Texas.

What Is the Price Target for RICK Stock?

Meanwhile, TipRanks’ AI Stock Analyst holds a Neutral rating on RICK stock, with a score of 64 out of 100. However, the average RICK price target is $39.00, which indicates a 35.46% upswing potential.