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Ex-Giants, Dolphins and Patriots cornerback Will Allen has been charged in a Ponzi scheme that targeted athletes across four major sports. The Securities and Exchange Commission claims Allen and a female partner, Susan Daub, preyed on athletes and defrauded investors in a complicated loan scam.
The names of the athlete-victims have not been released, and both Allen and Daub appear to have attempted to dodge service of the charges to avoid prosecution.
Allen and Daub ran multiple companies known collectively as Capital Financial that offered loans to cash-strapped athletes. Capital Financial raised money for the loans from investors who were promised sizeable returns, as much as 18% in annual interest rates. According to the SEC, the duo raised about $31.7 million from 40 investors from July 2012 to February 2015, while handing out close to $18 million in loans to athletes over that span.
So how is this illegal? Allen and Daub pocketed around $7 million of the $13 million difference in loan and investment money and used it for personal expenses. They also used money from some investors to pay off returns to others, a staple of any classic Ponzi scheme.
In a unique twist, Capital Financial often told its investors it was writing out larger loans than it was. In one case, the operation sold investors on a supposed $5.65 million loan to an NHL hockey player, of which investors put up $4 million. Investigators learned through the player's bankruptcy filing, however, that he only received a $3.4 million loan. So investors were paying in more than Capital Financial was paying out.
In a complaint filed with the U.S. District Court of Massachusetts, the SEC is asking the court to freeze all assets belong to Allen, Daub, and Capital financial. Prosecutors are also requesting that Allen and Daub pay back all ill-gotten gains along with civil penalties in the form of fines.
There have been no arrests made in the case, and no comment from either of the defendants.