The SEC filed the complaint against former Philadelphia Eagles’ player Merrill Robertson Jr., his business partner Sherman Vaughn Jr., and the company they co-owned, Cavalier Union Investments.
According to the complaint, Merrill and Vaughn promised to invest in diversified holdings but instead diverted nearly $6m, of the more than $10m raised, to pay for personal expenses and repay earlier investors in the fund.
Some of the money stolen was used to make cars payments and on family holidays, spa visits, luxury goods, education expenses for family members, and a luxury suite at a football stadium.
Ponzi-like scheme
The SEC said: “[The] defendants operated a Ponzi-like scheme using money from new investors to pay back old investors and finance their luxurious personal lifestyles.
“[They] targeted unsophisticated senior citizens and former football coaches, donors, alumni, and employees of schools Robertson had attended and induced them to buy Cavalier’s promissory notes that allegedly paid a fixed rate of return between 10% and 20%, annually.”
Functionally insolvent
According to the complaint, Robertson and Vaughn claimed that Cavalier’s funds were operated by experienced investment advisers.
“All of these representations were false,” the SEC said. “Cavalier did not have any divisions, investment funds, or investment advisers. Nor did it have a diversified investment portfolio.
“Cavalier was functionally insolvent shortly after it was formed and it relied on cash from investors to stay afloat and pay investors who requested their money back.”
The complaint further alleges that Cavalier’s only investments were in restaurants that had all failed by 2014, something the defendants never disclosed as they continued soliciting and accepting investors’ money.
“Our complaint alleges that Robertson and Vaughn preyed on elderly victims and others who placed their trust in these individuals, only to have their savings stolen,” said Sharon B. Binger, director of the SEC’s Philadelphia Regional Office.
US Attorney’s Office
In parallel, criminal charges have also been filed against Robertson by the US Attorney’s Office, which claims that the scheme caused over $8m in losses to clients.
If convicted of conspiracy to commit wire fraud, Robertson faces a maximum 20 years in prison.
