Litigation Release No. 23286 / June 15, 2015
Securities and Exchange Commission v. Capital Financial Partners, LLC et al., Civil Action No. 15-cv-11447-IT (D. Mass.)
United States of America v. Will D. Allen and Susan C. Daub, Case No. 15-mj-7095-JCB (D. Mass.)
Defendants in SEC Case Involving Loans to Professional Athletes Are Criminally Charged
The Securities and Exchange Commission announced that, on June 12, 2015, the U.S. Attorney's Office in Massachusetts filed a criminal complaint against William D. Allen and Susan C. Daub charging them with securities fraud. The criminal charges are in connection with the same conduct on which the SEC filed a civil fraud case on April 1, 2015 alleging that Allen and Daub, through various corporate entities, operated a Ponzi scheme that raised more than $31 million from investors who were promised profits from loans to professional athletes. In the civil fraud case, the federal court in the District of Massachusetts granted the SEC's request for emergency relief against Allen, Daub, and various corporate entities registered to them, and issued an order freezing their assets and affording other injunctive relief.
The criminal complaint alleges that Allen and Daub solicited and collected money from investors for loans to athletes that were never issued on multiple occasions. On one occasion, according to the criminal complaint, one investor received forged loan documents from Daub in connection with a purported loan to an athlete that was never made. The criminal complaint also alleges that Allen and Daub collected money for oversubscribed loans. As one example, according to the criminal complaint, Daub collected approximately $2.5 million from several investors to fund a $500,000 loan to an athlete in March 2013. The criminal complaint alleges that investor funds collected on both occasions were used to make payments to other investors, to make payments to an entity registered to Allen, and to make transfers directly to Allen.
In the SEC's earlier, related enforcement action, the SEC named Allen, Daub, Florida-based Capital Financial Partners Enterprises LLC, and Boston-based Capital Financial Partners LLC and Capital Financial Holdings LLC, alleging that they violated federal anti-fraud laws and related SEC anti-fraud rules. Four other entities owned or controlled by Allen, Daub, or both were named in the complaint as relief defendants based on their receipt of investor funds - WJBA Investments LLC, Insurance Depot of America LLC, Simplified Health Solutions LLC, and Simplified Health Solutions 2 LLC. On April 28, 2015, the defendants assented to a preliminary injunction restraining them from violating Section 10(b) of the Securities and Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933. The preliminary injunction also froze the assets of all defendants and relief defendants, restrained the defendants from accepting additional investor funds in furtherance of the alleged fraud, and restrained the defendants from destroying or concealing documents related to the alleged fraud.
Allen and Daub are scheduled to appear in federal court for a hearing in the criminal case on July 7, 2015.