OFFENSIVE PONZI
Ex- gridder is flagged in $ 32M loan scam: SEC
Former New York Giants cornerback and top draft pick Will Allen funded a lavish lifestyle for himself by running a $ 32 million Ponzi scheme that preyed on investors who sought to make an easy buck lending money to cashstrapped pro athletes, federal regulators allege in a new complaint.
Allen, 36, and business partner Susan Daub, 54, misled investors through their firm Capital Financial Partners by telling them they could profit by funding the athletes’ loans, which had annual interest rates exceeding 100 percent, according to a Securities and Exchange Commission complaint unsealed late Monday in Boston federal court.
Allen, of Davie, Fla., and Daub, of Coral Springs, Fla., raised $ 31.7 million from 40 investors from July 2012 to February 2015, but only shelled out $ 18 million in loans to athletes.
They used about $ 7 million of the illgotten gains for personal expenses, including settling tabs they racked up at fancy nightclubs, casinos, pawn shops and limo companies, the SEC says.
“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 complaint says.
The suit notes that Capital Financial provided loans to NBA, NHL, MLB and NFL players but does not name those who accepted the loans, which averaged about $ 600,000 each. It also cites the company’s Web site to explain why there is a market in providing loans to millionaire pro athletes.
While some of the loans to athletes were legitimate, others were fraudulent, according to the complaint.
In April and May last year, Allen and Daub raised $ 4 million from 24 investors for an NHL player after trotting out a sham promissory note and loan agreement from the unnamed player for $ 5.65 million, the suit says.
But the player never signed that note and the real size of the loan, which was kept from investors, was $ 3.4 million. Even after the hockey player filed for bankruptcy, Daub told investors the loan was “performing as expected,” according to the suit.
While the NHL player isn’t named, John “Jack” Johnson, a cocaptain of the Columbus Blue Jackets, who filed for bankruptcy last year, listed Capital Financial Holdings as a creditor with a claim of $ 2.3 million, according to bankruptcy filings.
The SEC suit said that the unnamed hockey player filed for bankruptcy on Oct. 7, 2014 — the same day that Johnson did, after his parents allegedly took advantage of him to fund their own lavish lifestyle.
Allen, a star at Syracuse University, was drafted by the Giants in 2001 and played with Big Blue through 2005 before signing with the Miami Dolphins. He played with the Dolphins from 2006 through 2011 before spending his final NFL season in 2012 with the New England Patriots on injured reserve.
Considered one of the NFL’s top cover corners in his prime, Allen tallied 15 career interceptions. He was arrested in 2010 for driving under the influence.
Messages left with Allen and Daub, and Johnson’s lawyer, were not returned.