The U.S. Securities and Exchange Commission (SEC) announced Tuesday that fraud charges were filed against a former National Football League (NFL) player. He is alleged as having operated a Ponzi scheme that raised over $31 million.
According to the SEC complaint, William Allen and Susan Daub claimed to make loans to professional athletes who were short of cash. Allen and Daub told investors that they could profit by funding the loans and receiving interest of up to 18% paid by the athletes. The complaint alleges that from July 2012 through February 2015, the defendants paid approximately $20 million to investors while receiving a little more than $13 million in loan repayments from athletes.
To fill the nearly $7 million gap, Allen and Daub used money from some investors to pay other investors, the hallmark of a Ponzi scheme.
Basically, the couple advanced approximately $18 million to athletes while at the same time raising more than $31 million from investors. Allen and Daub allegedly misled investors about the terms, circumstances and even the existence of some of the loans and used some investor funds to pay personal expenses such as charges at casinos and nightclubs, or to fund other business ventures.
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Paul G. Levenson, director of the SEC’s Boston regional office, said:
The defendants sold investors on the idea of lending money to pro athletes, but we allege that’s not where a large portion of the investors’ money went. As in any Ponzi scheme, the appearance of a successful investment was only an illusion sustained by lies.
The complaint alleges that Allen and Daub, along with Florida-based Capital Financial Partners Enterprises, Boston-based Capital Financial Partners and Capital Financial Holdings, violated federal anti-fraud laws and related SEC anti-fraud rules. In addition to the relief obtained last week, the SEC is seeking a court order to restrain the defendants from violating the same laws and to require them to return their allegedly ill-gotten gains with interest and pay civil monetary penalties.
Four other entities are named in the complaint as relief defendants, based on their receipt of investor funds. The SEC is looking to have the following entities return their allegedly ill-gotten gains with interest: WJBA Investments, Insurance Depot of America, Simplified Health Solutions and Simplified Health Solutions 2.
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