Cambridge bicycle shop forced into bankruptcy over years of debts and bikes it never delivered during the pandemic

Bicycle Retailer and Industry News reports a federal bankruptcy judge in Boston has appointed a trustee to oversee the Chapter 11 bankruptcy of CrimsonBikes on Massachusetts Avenue in Cambridge as it seeks to deal with three creditors - an e-commerce provider, a Boston-based non-profit developer and a customer who pre-paid for a bike he says he never got.

The shop's landlord also alleges it's owed several hundred thousand dollars in back rent.

SmartEtailing, of Broomfield, CO, which sets up online stores for bicycle retailers, and the Community Builders, a Boston-based non-profit, had originally sought to force CrimsonBikes into Chapter 7 bankruptcy, which would have dissolved the company 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 lawyer as trustee to look over CrimsonBikes's finances and make recommendations to the judge on how to reorganize the company.

Bicycle Retailer reports the Chapter 7 case arose from a federal lawsuit SmartEtailing filed last year, alleging that CrimsonBikes responded to growing numbers of online customers requests for refunds, after the shop couldn't fulfill their orders as the pandemic threw the bike market into chaos, by telling them to submit claims to their credit-card companies, rather than sending them back their money.

SmartEtailing alleged CrimsonBikes - named for the Harvard dorm room in which owner Chales James got the idea for the company - even provided letters to some customers so they could request refunds from the credit-card companies. Because of the nature of its contract with a credit-card-processing company, SmartEtailing was then charged by the credit-card companies to make up some of the payments - roughly $400,000, SmartEtailing alleges.

As of April, some 76 online customers had filed complaints with the Better Business Bureau, Cambridge Day reports.

CrimsonBike charges that SmartEtailing is all to blame, by locking its account in the midst of unprecedented "service and supply chain disruptions due to the COVID-19 pandemic" and so it couldn't issue refunds to customers.

Being locked out of their ordering system made it nearly impossible for CrimsonBikes to issue refunds to those customers who chose not to wait for their bikes or to fulfill orders to waiting customers. Through CrimsonBikes diligent efforts, they were able to recreate many of their records and issue appropriate refunds or fulfill the customer orders. SmartEtailing's actions by locking CrimsonBikes out of the online system without notice was a breach of the contract between the parties was done in bad faith and caused CrimsonBikes substantial damage.

But the creditors charge CrimsonBikes actually stopped paying its bills long before the pandemic. The Community Builders, a Boston-based non-profit that builds housing and rents out commercial space in some neighborhoods, joined the Chapter 7 petition because of more than $200,000 it says CrimsonBikes owes it for a failed attempt to open a second retail shop at a building the group owns at 390 Western Ave. in Allston in 2017.

The non-profit alleges CrimsonBikes stopped paying its rent toward the end of the year and failed to pay the contractor it had hired to build out the space, according to a suit the non-profit filed against CrimsonBikes in Suffolk Superior Court. The contractor then got a "mechanic's lien" against Community Builders for the work. The Community Builders wound up paying the contractor $200,000 and in 2019 sued to get its money back. The case remains open.

Also looking for money: The bike shop's Cambridge landlord, which says it's owed some $600,000 and counting in back rent on the Mass. Ave. location. The landlord was not one of the petitioners seeking to dissolve CrimsonBikes, but one customer - who pre-paid for a bike he never got - is.

Details of the allegations by SmartEtailing (1.4M PDF).
Crimsonbikes answer to the bankruptcy petition (287k PDF).
Details of the Cambridge landlord's allegations (689k PDF).
Details of the Community Builders' allegations in Suffolk Superior Court (287k PDF).