Think of a secret you’ve kept to yourself for years. Something you would never tell your clients for fear they’ll think of you differently, and just maybe, take their money elsewhere.
Maybe this secret is something silly, like you wake every EVERY morning and rap “Lose Yourself” into a mirror in your underwear with the same fervor as Em:
If your clients found this out, it’s possible that a few would think it’s a little weird, some might even be impressed, but I doubt too many would desert you for such a harmless thing.
Or maybe this secret is something darker and much more harmful. Maybe you have millions of dollars worth of gambling-related debts, and you’re soliciting millions in a scam investment in order to pay those debts off. Any client in his or right mind would want to know this information, but a secret like this will rarely be known until it’s too late.
Over and over again, I preach the need for oversight of the people managing professional athletes investments and banking. The less you as an athlete understand and review your finances, the easier the opportunity is to defraud you. The majority of advisors are doing right by you, but you also have no idea of the pressures in their lives that would cause them to defraud you. Desperate people do desperate things.
Shock Jock's Shocked Jaw
In a complaint dated September 6, 2017, the SEC alleged securities fraud against outspoken New York-based sports radio personality, Craig Carton, of the famed WFAN show, Boomer (Esiason) and Carton. The SEC stated Carton falsely claimed to own millions of dollars worth of concert tickets for acts like Adele, Justin Bieber, Katy Perry, and Metallica.
Carton provided fake documents with forged signatures to investors that reflected agreements for the purchase of large blocks of tickets. With these documents, Carton and his associate, Joseph Meli, misappropriated $5.6 million from two investors.
Carton told investors he would re-sell these tickets, and the investors would receive a “1.3x” to “1.5x” (30% - 50%) return within a few months of investment. With one of his investors, Carton did provide a 30% return, but it wasn’t based on ticket sales. Instead, this return was provided from additional money received from another investor as well as a high-interest rate personal loan Carton received. Carton correctly believed that if he showed his investor a return on the first investment, the investor would then invest even more money a second time.
In a stroke of either ego, idiocy, or both, Carton named one of the entities allegedly misappropriating funds, Misoluki LLC, or as I read it, “me-so-lucky” LLC.
Hedge Your Bets
Carton also enticed a hedge fund to invest $4.6 million in a similar concert ticket scam, yet this fraud was even more brazen and included fabricated emails, relationships, and agreements. Carton used a prior relationship with a “major sports and entertainment venue” to give the scent of legitimacy to the Hedge Fund. Carton doctored prior emails he had with the Venue to evidence he was in negotiations with the Venue for tickets.
The Hedge Fund, for no reason that I can understand, never called the Venue Company to conduct its own due diligence to ensure the Venue Company had a relationship with Carton.
The Hedge Fund then signed a $2 million investment agreement with Carton (and his entities) to receive a 10% annualized return and 50% of all profits. Carton wanted the Hedge Fund to send the $2 million directly to his entities (red flag for this investment, Hedge Fund!), but the Hedge Fund preferred to send the funds directly to the Venue Company.
Again, the Hedge Fund did not follow up on its money with the Venue Company to ensure they received the money. Instead, Carton contacted the Venue Company - who was completely unsuspecting of the business with the Hedge Fund because Carton had fabricated all the documents - to say the wire was sent in error and should be diverted to an account owned by Carton. The Venue Company complied1 with Carton’s request, and Carton used the money to pay off casinos and a previous investor.
Months after the investment, the Hedge Fund requested the balance of cash in its account at the Venue Company. Carton replied, “$831,615, on deposit.” There was actually $0 on deposit.
The SEC’s complaint ends with the usual tidbit we read on most of these frauds: the Hedge Fund has not been repaid any of its $4.6 million.
A few weeks ago, I wrote about the fraud against Tim Duncan by his advisor of over 15 years. His advisor, Charles Banks, ran into pressure because he was the majority shareholder and Chairman of a company that was running out of money and heavily in debt. This led him to defraud Duncan out of $7.5 million. After 15 years of a relationship, his advisor did this!
The point is you have no idea when pressures will arise with those you entrust with your money. Once you have given someone control of your money, he or she now has the opportunity to defraud you. That opportunity is made more/less difficult based on the level of your involvement and review of the activity.
In most cases, even if the opportunity is wide open for a trusted advisor to defraud you, he or she is not going to because they’re a good person. But then sometimes good people have secrets.
If you do not believe you can adequately monitor your finances, Contact BrightLights for a free discussion about your risks.
1 - Don’t ask me why the Venue Company didn’t send the money back to the original sender because they should have. Diverting millions of dollars to a third party who has not provided a shred of evidence sourcing the money is not the best of ideas.