SEC Alleges Ex-NFL Player Ran $31M Ponzi Scheme

In football, a cornerback is tasked with defending against pass offenses. It appears one former NFL player wasn’t doing much defending on behalf of investors off the field. Instead, the Securities and Exchange Commission alleges former New York Giants player Will Allen used his big league connections to assist in the operation of a $31 million Ponzi scheme based on making loans to cash-strapped pro athletes.

The SEC filed [PDF] civil fraud charges against Allen, business partner Susan Daub and their investment firms Capital Financial Partners for allegedly operating a Ponzi scheme from July 2012 to February 2015.

The complaint, which was first filed on April 1 in Boston, was sealed until early this week, The Associated Press reports. U.S. District Judge Indira Talwani previously approved the agency’s request to freeze the assets of Daub, Allen and Capital Financial.

Allen, who also appeared on the roster for the Miami Dolphins, ended his NFL career in 2013 after being signed by the New England Patriots and placed on injured reserve in the fall of 2012. His partner, Daub, is described by the SEC as a financial professional living in Florida.

According to the SEC, the scheme operated under the guise that Capital Financial made loans to professional athletes who needed money while they wait to get paid under their contracts.

Allen and Daub allegedly raised $31.7 million from at least 40 investors who were told they could participate in some or all of the funding for a specific loan to a specific athlete.

After providing funds, investors received copies of the purported loan documents and a schedule of monthly repayments reflecting interest rates of 9% to 18% on the loans which lasted between a few months and a few years.

The SEC claims that during the life of the scheme, Capital Financial advanced approximately $18 million to athletes.

That means Allen and Daub supposedly collected $13.7 million more from investors than they actually provided to athletes whose loans the investors were thought to be funding.

“Allen and Daub have used false documentation in order to mislead investors as to the terms, circumstances, and even existence of some of the loan transactions in which the investors are induced to participate,” the SEC complaint states. “Allen and Daub have withdrawn more than $7 million of the investors’ money to pay personal expenses or to fund other business ventures.”

Additionally, the SEC claims Capital Financial paid approximately $20 million to investors from July 2012 to February 2015, despite the fact that the company only received $13.2 million in loan repayments from athletes.

The SEC claims that Allen and Daub were able to fill the nearly $7 million funding gab by recycling money from some investors to other investors, constituting a Ponzi scheme.

While many of the loans provided by Capital Financial were legitimate, the SEC claims one of the largest was a “sham.”

In the spring of 2014, at least 24 investors provided more than $4 million to participate in a purported $5.65 million loan to an NHL player, the SEC complaint states.

Daub provided some of the prospective investors with a purported copy of a $5.65 million promissory note signed by the player and a loan agreement signed by the player and by Allen,” according to the complaint.

The SEC concluded that the loan was fake after the NHL player filed for bankruptcy in the fall of 2014 and listed a $3.4 million loan from Capital Financial.

A month after the bankruptcy filing, Daub sent an email to the investors involved in the transaction assuring them that the player’s loan was “performing as expected,” without mentioning that the actual loan was for $3.4 million, not $5.65 million.

The complaint, which was first filed in Boston on April 1, seeks a court order requiring Daub, Allen and Capital Financial to return the purported ill-gotten gains with interest and to pay civil monetary penalties.

SEC files fraud charges against ex-NFL player, partner [The Associated Press]