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Regulation and Compliance > Federal Regulation > SEC

Ex-NFL Player Accused of Ponzi Scheme: SEC

By Janet Levaux

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The Securities and Exchange Commission has charged former NFL cornerback Will D. Allen and a partner with fraud and frozen their assets after uncovering a Ponzi scheme that raised $31 million from at least 40 investors but only paid out some $20 million.

Allen, who played for the New York Giants, Miami Dolphins and New England Patriots, co-owned Capital Financial Partners, which made loans of roughly $18 million to pro athletes who were short of cash (during the off seasons) between July 2012 and February 2015.

“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,” said Paul G. Levenson, director of the SEC’s Boston regional office, in a statement.

The SEC states that Allen and Susan Daub, a financial professional, advanced about $18 million to athletes while raising over $31 million from investors. The pair “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.”

According to the Financial Industry Regulatory Authority’s BrokerCheck, Daub has been affiliated with a number of broker-dealers since passing the Series 6 exam in 1995 and the Series 63 test in 1996, though she has not been registered with a firm since 2010: Morgan Keegan (2007-2010), Tower Square Securities (2005-2007 and 2003-2004), Rampart Financial Services (2004-2005), Investors Capital (2000-2003), Centennial Capital Management (1999-2000) and Princor Financial Services (1995-1999).

The Giants drafted Allen in the first round out of Syracuse University in 2001. He was lured away with a four-year, $12 million contract by the Dolphins in 2006 and signed an extension for $16 million in 2009. He was arrested for driving while intoxicated in early 2010, and the Dolphins ended his playing contract with the team in September 2011. He then signed with the Patriots in 2012 and left the NFL in 2013.

Investor Scheme

The former football player and his partners sold investors on the idea that they earn money by loaning it to players in Major League Baseball, the National Basketball Association, National Hockey League and NFL.

“Allen and Daub tell investors that they can participate in some or all of the funding for a specific loan to a specific athlete. Investors receive copies of the purported loan documents and a schedule of monthly repayments reflecting interest rates of 9% to as much as 18% on loans lasting from a few months to a few years,” according to a court document filed last week with the U.S. District Court in Massachusetts.

Athletes could borrow a minimum of $75,000, and typically their loans totaled $600,000 over a 12-month period.

“Investors [were] often led to believe that their investment … [was] backed by the athlete’s contract, meaning that Capital Financial receives repayments directly from the athlete’s team or could do so if necessary,” the court document explained. However, such arrangements were not in place.

Allen and Daub would withdraw money raised from investors in a manner that “does not appear consistent with any legitimate business use or practice,” the SEC says.

“For example, the [personal bank] card purchases include, among other things, charges at casinos, pawn shops, jewelers, grocery stores, cigar shops and clothing retailers,” the statement said. “Additional card purchases [were] made at storage facilities, airlines, hotels, restaurants, night clubs and limousine companies.”

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