SEC Charges Former N.Y. Giants Will Allen of operating Ponzi scheme

SEC Charges Former N.Y. Giants Player With Fraud

Excerpt:

A Boston federal judge froze assets of former National Football League cornerback Will Allen, after the U.S. securities regulator charged him and a business partner with operating a Ponzi scheme that purported to loan money to professional athletes. The Securities and Exchange Commission accused Mr. Allen, who played with the New York Giants, the Miami Dolphins and the New England Patriots, of paying some investors from money received through other investors, rather than from legitimate business income. The loans to professional athletes were made from 2012 to earlier this year, the SEC said. According to a complaint unsealed late Monday, Mr. Allen and Susan Daub, who together founded a group of companies that included Boston-based Capital Financial Partners, told investors they could receive interest of up to 18% from Major League Baseball, National Basketball Association, National Hockey League and NFL players. They marketed the business as giving athletes access to at least $75,000 loans in the off-season or early in the season, when they may be strapped for cash based on their contracts. The pair raised $31 million from at least 40 investors but allegedly misled them about the terms of the loans. They used investor funds to pay for personal expenses, including charges at pawn shops, casinos and nightclubs, according to the complaint. “As in any Ponzi scheme, the appearance of a successful investment was only an illusion sustained by lies,” said Paul Levenson, who heads the SEC’s Boston office, which investigated the case.

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“From July 2012 to February 2015, Capital Financial received approximately $13.2 million of loan repayments from athletes,” the SEC alleges in its indictment. “During the same period, the company paid approximately $20 million to investors. Lacking any other significant source in revenue, it is apparent that Capital Financial managed to pay nearly $7 million more to investors than it received from athletes only because Allen and Daub recycled a substantial portion of the approximately $31.7 million raised from investors. In other words, they used money from some investors to pay other investors, while at the same time funneling millions of dollars of investor money to themselves — the hallmarks of a Ponzi scheme.” The SEC alleges that Allen and Daub took more than $7 million for themselves, paying for personal expenses and making charges at casinos, pawn shops, jewelry stores, grocery stores, cigar shops and clothing stores. They also made purchases at storage facilities, airlines, hotels, restaurants, nightclubs and limousine companies.

And so the ancient quote: "A fool and his money are soon parted." Image from Wiki