On Monday, a federal lawsuit in Los Angeles’ United States District Court was filed against Rhude founder Rhuigi Villaseñor. The lawsuit was filed by Villaseñor’s business partner George Robertson, who owns 20% of the Rhude brand. According to the lawsuit, Robertson was a “well-known music agent and fashion entrepreneur” who Villaseñor brought in as a partner in 2016 after Rhude started gaining popularity. Robertson got a 20% stake in the brand after he invested $50,000 to develop the label at the end of 2016. Villaseñor owns the other 80%.
The lawsuit alleges that Villaseñor mishandled Rhude’s money by siphoning off millions in revenue for his own personal expenses, using Rhude’s employees to work on collaborative projects that only brought money back to Villaseñor, attempting to cut out his business partner due to jealousy, and more. The damning allegations within this lawsuit come just weeks after Villaseñor ended his role as the creative director of the Swiss luxury house Bally, a position he only held for a little over a year.
Villaseñor has not commented on the lawsuit that was first reported by the Los Angeles Times this morning. He did however make an Instagram post sharing the date of Rhude’s upcoming presentation at Paris Fashion Week on Wednesday with the caption, “Come to my show if you wanna talk.”
Complex looked through the complaint filed against Villaseñor. Here’s what we found.
Rhuigi Villaseñor Allegedly Didn’t Design Rhude’s Most Popular Items
One of the most surprising allegations made in the lawsuit is that Villaseñor's business partner claims that Rhuigi didn’t design some of Rhude’s most iconic items. “Robertson designed the Traxedo pants that brought RHUDE into the mainstream and drove the majority of its sales in 2018,” the suit reads, citing ASAP Rocky and Ellen DeGeneres wearing the pants as evidence of the pants’ popularity. The suit claims that Rhude’s Traxedo pants is what gained Rhude “recognition in the luxury fashion space rather than being known merely as a T-shirt and hoodie sweatshirt brand.” The suit also claims that Robertson also designed Rhude’s popular “Rhecess” basketball sneakers, a sunglasses collaboration with Thierry Lasry that was worn by stars like Jay-Z, and their ever-popular shorts.
Rhuigi Allegedly Tried To Cut His Business Partner Out Due to Jealousy
The lawsuit claims that from 2016–2019, Robertson was the one making the “fundamental business infrastructure decisions” for Rhude. The suit says it was his name, contacts, and credit used on lease guarantees, credit cards, large personal cash advances, PayPal accounts, and other material aspects of Rhude’s business. The lawsuit alleges that Villaseñor grew jealous over the credit Robertson received from the Rhude team internally and his control over Rhude’s design team. The suit alleges that Villaseñor was bothered that Robertson’s designs for the brand were popular and that it was starting to “look like George” rather than his own vision.
So, the suit alleges that once Rhude gained traction in the market and brand value, Villaseñor cut Robertson out. The suit reads, “Villaseñor sought to eliminate Robertson’s creative contributions to the brand, assert his own vision, and keep all profits for himself.” Allegedly, Robertson was told he could not come to the brand’s offices anymore in mid-2020 and then had his access to company files cut in January 2021. In July 2021, Villaseñor allegedly ordered his employees to terminate every rh-ude.com email account except for himself and six other employees. In October 2021, the suit says Villaseñor attempted to buy out Robertson’s 20% stake for $5 million, implying Rhude was valued at $25 million at that point in time. Robertson did not take the deal and still has his stake in the brand today.
Rhuigi Allegedly Made Lavish Purchases With Rhude’s Revenue Under the Guise of “Advertising”
The lawsuit alleges that Rhude’s advertising expenses are “bloated” and that Villaseñor charged his personal own expenses to Rhude. It also suggests that Villaseñor pocketed much of the label’s revenue to fund his own lavish lifestyle. In 2020, Villaseñor publicly said Rhude’s revenue was $30 million and then “over $30 million” in 2021. However, the lawsuit says the revenue reported on Rhude tax returns was just $10 million in 2020 and $18 million in 2021. The lawsuit alleges that Villaseñor improperly used Rhude’s revenue for personal purchases he disguised as “advertising.” The lawsuit says that within the fashion industry advertising spending is typically 5% of revenue, yet Rhude’s tax returns show the brand spent nearly 27% ($2.7 million) of its revenue on “advertising.” In 2021, 30% of their $18 million in revenue ($5.4 million) was also spent on advertising.
Rhuigi Allegedly Sold Rhude Products Privately to Benefit Himself
According to the lawsuit, in March 2018, Villaseñor created a personal limited liability company called RMV to further divert Rhude’s profits into his own wallet. He did this by allegedly selling Rhude’s product to VIP clients but directing them to pay himself or RMV instead of Rhude. The lawsuit cites one example in September 2020, when Villaseñor sold $15,331.50 worth of Rhude products in a private sale that was handled by his employees but invoiced to RMV rather than Rhude. Another example provided in the lawsuit is that Villaseñor sold Rhude bomber jackets to a VIP client in 2021 but instructed him to pay RMV’s PayPal account and not Rhude’s. The lawsuit alleges that “hundreds of thousands, if not millions,” went to RMV or Villaseñor, rather than RD.
Rhuigi Allegedly Didn’t Pay Rhude Employees For Collaborative Projects Under His Name
Keen followers of Villaseñor’s work have likely noticed that there are many collaborations with the designer that aren’t Rhude but marked as “By Rhuigi.” This lawsuit claims that there was allegedly a personal profit-driven motive for Villaseñor to do that. Although Rhuigi started his own private entity, RMV, the suit says he constantly used Rhude’s resources and employees to do the work on projects that were labeled to be solely created by him and not Rhude, then he kept the profits for himself. The complaint claims this was done dozens of times and gives examples. In October 2021, Villaseñor ordered embroidery for a custom jumpsuit for a private client and sold through RMV, but allegedly charged Rhude for the product costs. In 2021, another Villaseñor collaboration outside of Rhude with the entertainment, automotive, and aviation company Wires Only included dozens of designs allegedly made by Rhude employees who were not compensated for their work. Villaseñor’s 2021 collaboration with Puma is even mentioned in the suit. Although Rhude and Puma previously collaborated in 2020, Villaseñor explicitly expressed that his second partnership with the brand was a “Rhuigi x Puma partnership NOT Rhude,'' and used Rhude’s employees again to create a collection they were allegedly not compensated for.
Rhuigi’s Zara Line Was Allegedly Named “Rhu” to Cut Rhude Out
The lawsuit takes particular issue with Villaseñor’s collaborative “Rhu” line made for Zara, labeling it as an “unlawful scheme to misappropriate and dilute the Rhude trademark for his personal benefit.” The lawsuit states that in March 2021, Villaseñor reached out to a labels manufacturer to produce “the artwork for 2 new woven labels we would like to develop for Rhude.” The lawsuit shows an image of the label that just reads the letters “Rhu.” Six months later, Villaseñor signed an agreement with Zara to produce a collaborative line of clothing branded as “Rhu.” The lawsuit argues that even though the branding for Rhu was developed by Rhude’s team, Rhude was cut out from all the profits from the Zara collaboration because it was a collaboration solely between Villaseñor and Zara rather than Rhude. The suit argues that Villaseñor capitalized off Rhude’s image and trademarks for his own personal gain. It also alleges that Rhude employees created the designs for the Zara collaboration but neither business partner nor Rhude’s employees received any compensation for the collaboration.
Rhuigi Is Allegedly Trying to Hide His Tracks
Robertson says in the suit that he began looking for answers about Rhude’s financial discrepancies earlier this year and demanded Villaseñor to provide all of Rhude Companies' financial statements, books, records and tax filings since Robertson joined in 2016, plus any revenue streams that may have been diverted by Rhude related to Villaseñor’s solo collaborations. After waiting three months, Robertson says he received tax returns, balance sheets, and statements of profits and losses from only 2017 to 2021. The lawsuit says Villaseñor has not produced Rhude’s financials for 2022, any information related to Rhude Holdings, or any info related to Rhude revenue that could have potentially been diverted from Rhude to Villaseñor or his personal liability company RMV. His partner, and other plaintiffs within the lawsuit, which include Rhude Designs LLC and RVRG Holdings LLC, are asking to be awarded a minimum of $10 million for damages.
