Ex-Miami Dolphins Player Accused of Running Ponzi Scheme
Miami Dolphins fans may remember Will Allen’s five-year stint with the team as a defensive back. Allen played 11 seasons altogether in the NFL, ending his career with the New England Patriots in 2012. However, Allen’s time in New England was not exclusively devoted to football; he also co-founded a group of investment companies which, according to the U.S. Securities and Exchange Commission, functioned as a Ponzi scheme.
SEC v. Capital Financial Partners, LLC
The SEC filed a civil complaint on April 7 in Boston federal court against Allen and his business partner, Susan C. Daub, who co-founded several businesses under the name Capital Financial. The business of Capital Financial was making short-term loans to professional athletes. Due to the nature of athlete contracts, there are situations where a player might need a short-term loan to help manage cash flow or make a large upfront purchase. Capital Financial offered loans starting at $75,000 with interest payments of between 9% and 18%.
Capital Financial solicited investors based on its purported connection to athletes. According to the SEC, “Capital Financial typically provides [investors] with information about the athlete’s sports contract, including whether the amounts that the team owes to the athlete are guaranteed.” This leads investors into thinking their investment is actually backed by, and tied to, a specific athlete’s contract.
But in fact, the SEC claims, Capital Financial has raised “$14 million more from investors than they advanced to athletes.” In other words, some investors are buying into loans that do not actually exist. For example, the SEC said Capital Financial received $4 million from two dozen investors to underwrite a $5.65 million loan to an unidentified professional hockey player. No such loan was ever made. Yet Capital Financial has still somehow made monthly “loan repayments” to the investors. The SEC said this money likely came from “loan repayments by other athletes and money from other investors.”
Indeed, the SEC says that since 2012, Capital Financial has “recycled” money from investors to create the illusion of profitability—in other words, it is a Ponzi scheme. While using money from new investors to pay off older investors, Allen and and Daub also allegedly diverted more than $7 million to pay for “personal expenses and unrelated business ventures.” Allen purportedly used at least $200,000 of investor funds to pay off a litany of personal debts.
Of course, the SEC’s complaint is only a statement of allegations and not a final judgment. But a judge has already agreed to freeze Capital Financial’s assets pending resolution of the SEC’s charges.
Don’t Fall for the Bait
Ponzi schemes take many different forms as the schemers attempt to lure investors with promises of easy profits. In this case, the SEC believes investors were duped by the appeal of loans to well-known professional athletes with large guaranteed contracts. But regardless of the bait, all Ponzi schemes end the same for investors left out once the schemers stop attracting new funds. That is why if you have been the victim of a Ponzi scheme or similar scam, and you need independent legal advice on how to proceed, you should contact Florida securities fraud attorney Gregory Tendrich, P.A. right away.