RCI Hospitality Holdings: Legal Risks and Shareholder Impact Amid Escalating Class-Action Lawsuit

The recent tax fraud and bribery indictment against RCI Hospitality Holdings, Inc. (NASDAQ: RICK) has triggered a seismic shift in the company's legal and financial landscape. On September 16, 2025, the New York Attorney General announced charges against RCI, its CEO Eric Langan, CFO Bradley Chhay, and others, alleging a 14-year scheme to bribe a state tax auditor to avoid paying over $8 million in sales taxes, according to Hagens Berman. This revelation sent RCI's stock plummeting 16% in a single day, erasing nearly $150 million in market value, as noted in a Kirby McInerney alert. Now, a securities class-action lawsuit-Hernandez v. RCI Hospitality Holdings, Inc.-has been filed in the Southern District of Texas, according to the Justia docket.

Legal Allegations and Shareholder Impact

The indictment paints a damning picture of corporate misconduct. According to the New York Attorney General's Office, RCI executives conspired to bribe a tax auditor to evade sales tax obligations from 2010 to 2024, a period during which the company repeatedly assured investors of its adherence to legal and accounting standards (as noted in earlier Hagens Berman coverage). The lawsuit, led by Hagens Berman and Kirby McInerney LLP, argues that these disclosures were materially false and misleading, concealing the "significant legal and financial risks" the company faced, as described in a Hagens Berman release.

The market's reaction was immediate and severe. RCI's stock price fell from $34.32 to $28.79 per share on the day of the indictment, a drop that wiped out over $1.2 billion in shareholder value during the class period (December 15, 2021–September 16, 2025), according to Kirby McInerney's alert. For investors, this decline underscores the fragility of RCI's business model, which has long relied on opaque revenue streams and aggressive tax strategies.

The Lead Plaintiff Deadline and Investor Strategy

With the lead plaintiff deadline set for November 20, 2025, shareholders must act swiftly to secure their position in the class-action suit, according to a GlobeNewswire alert. The deadline is critical: the lead plaintiff will shape the litigation strategy, including settlement negotiations and discovery demands. Firms like Hagens Berman and The Rosen Law Firm-both of which have a track record of securing multi-million-dollar settlements in securities fraud cases-are actively recruiting investors, as shown in a Rosen Law Firm filing.

However, the path to recovery is fraught with uncertainty. Unlike straightforward cases of accounting fraud, this lawsuit hinges on proving that RCI's executives intentionally concealed a long-running criminal scheme. Legal experts note that such cases often face procedural hurdles, including motions to dismiss and challenges to the materiality of alleged misstatements, as discussed in an EdgarIndex analysis.

Financial Exposure and Historical Precedents

Estimating RCI's potential liability requires a nuanced analysis of both the class-action lawsuit and broader regulatory trends. In 2024, the SEC secured a $25 million settlement from a hotel chain, a precedent that suggests RCI could face similarly steep penalties if regulators intervene. Commentary and case summaries related to RCI's situation are available in the 11th.com case. Meanwhile, the class-action suit could demand a settlement in the hundreds of millions, depending on the number of participating shareholders and the average loss per investor.

A key wildcard is the outcome of the criminal case. If Langan, Chhay, or other executives are convicted, it could amplify the company's financial exposure by triggering additional civil penalties or reputational damage that further depresses stock value. Conversely, a favorable resolution in the criminal case might limit the scope of the class-action claims.

Conclusion: A High-Stakes Legal and Financial Crossroads

For RCI Hospitality Holdings, the coming months will test the resilience of its corporate governance and financial stability. The class-action lawsuit, coupled with the ongoing criminal investigation, represents a dual threat that could redefine the company's trajectory. Shareholders must weigh the risks of prolonged litigation against the potential for recovery through a settlement or court ruling.

As the lead plaintiff deadline approaches, investors are advised to consult legal counsel and assess their exposure. In an industry where regulatory scrutiny is intensifying, the RCI case serves as a cautionary tale about the perils of opaque business practices-and the power of collective action to hold executives accountable.