The U.S. Securities and Exchange Commission announced fraud charges against former NFL cornerback, William D. Allen and his business partner, Susan C. Daub.
According to the SEC complaint unsealed late yesterday, Allen and Daub allegedly operated a Ponzi scheme that raised more than $31 million from investors who were promised substantial profits from loans to professional athletes including NFL players who were short on cash. Allen and Daub allegedly told investors that the investment could bring a profit by funding loans to professional athletes and receiving interest of up to eighteen-percent (18%) paid by the cash strapped athletes.
In the complaint, the SEC alleges that from July 2012 through February of this year, the defendants paid approximately $20 million to investors while only receiving a little over $13 million in loan repayment from the athletes. In order to fill the nearly $7 million gap, the defendants allegedly used money from some investors to pay other investors. This is the trademark of any Ponzi scheme; using money from one investor to pay the next.
Additionally, according to the SEC’s complaint, Allen and Daub allegedly advanced approximately $18 million to athletes while raising more than $31 million from investors in the scheme. The complaint also states that Allen and Daub allegedly mislead investors about the terms, circumstances, and even the existence of some of the loans. Also, the SEC alleges the defendants uses some of the investor funds for personal expenses including charges at casinos, nightclubs, and to fund other business ventures.
The SEC’s complaint also alleges Allen, Daub, and Florida-based Capital Financial Partners Enterprises LLC, Boston-based Capital Financial Partners LLC, and Capital Financial Holdings LLC all violated federal anti-fraud laws and related SEC anti-fraud rules. However, there are four other entities owned or controlled by Allen, Daub, or both are named in the complaint as relief defendants based on their alleged receipt of investor funds. The SEC is seeking to have the entities of WJBA Investments LLC, Insurance Depot of America LLC, Simplified Health Solutions LLC, and Simplified Health Solutions 2 LLC return their allegedly ill-gotten gains with interest to investors.
The SEC received an asset freeze for protection of investors and other preliminary relief against the named defendants from the U.S. district court in Boston.
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