I remember hearing about how this company ran, and figuring it was nothing but a giant boiler room sales pit and a gimmick. I am not surprised.
It's not just Groupon, this entire business model is unsustainable: asking a retailer to discount his products for a fee in the hopes that he will attract new "local deal" customers willing to pay full retail next time, when the ONLY reason these customers came in the first place was because of the discount.
1) Groupon taks a large cut on top of the big discount. It used to be that GroupOn wanted a 50% discount and then 50% of the revenue. This is like running a 75% off sale.
2) The customers are poorly-qualified leads. All we know is that they are local and like a good deal. That doesn't give the retailer much indication that they would be a good customer (and I think we have seen that they aren't).
I remember my girlfriend many years ago working in a restaurant that offered a ‘kids eat free’ deal one night a week. People would come in with their kids and their neighbors’ kids, order one burger and let the restaurant feed a bunch of kids for nothing. Obviously the restaurant needed to put some terms around the deal, which they later did, but some people are just a blight on humanity in this way.