The History Of Troubled NFLPA Registered Financial Advisors
Since its inception in 2002, the NFLPA Financial Advisor program has had more than its fair share of troubled financial advisors registered in the program. Kirk Wright, Nelson “Keith” Bond, Jeffrey Rubin, Kurt Barton, Jinesh “Hodge” Brahmbhatt, Aaron Parthemer, Sylvester King, Jr., Jonathan Schwartz, and Ash Narayan were all registered in the NFLPA Financial Advisor Program and got into serious trouble with regulators or investors. Jeff Rubin, Hodge Brahmbhatt and Aaron Parthemer were banned for life by the Financial Industry Regulatory Authority (“FINRA”). Kurt Barton, Kirk Wright, Ash Narayan, and Jeff Rubin had charges brought against them by the Securities and Exchange Commission. Sylvester King, Jr. was suspended by FINRA for 18 months.
Kirk Wright and Nelson Bond were responsible for players to losing roughly $20 million. Rubin was responsible for players losing roughly $42 million. Brahmbhatt $12 million. Parthemer estimated at $10 million, and Narayan $30 million. From our own investigation we believe the Brahmbhatt numbers could be underreported by nearly $10 million and the Rubin numbers could be underreported by about $30 million. From the program’s inception, professional athletes (not all NFL players), have lost roughly $150 million investing with financial advisors registered in the program.
Below is a summary of each of the advisors and their misconduct. There are commonalities between all of the advisors. Wright, Barton, Rubin, and Brahmbhatt all owned their own firm, making it nearly impossible for the athletes to recover money after the downfall. Only Parthemer and King were employed by a large firm. Athletes who invested with Parthemer and King were able to recover a substantial portion of their losses. Narayan and Schwartz worked at medium sized firms and it appears their victims may be able to recover some of their losses.
Commonalities can be found amongst the advisors and investments. Wright, Rubin, Brahmbhatt, and Parthemer lived very flashy lives. Every investment at issue with all of the advisors related to private deals and not publicly traded securities. Most of the advisors had red flags in their background that would have come up in a background check.
1. Kirk Wright and Nelson “Keith” Bond
Kirk Wright was a hedge fund manager from Atlanta who was registered with the NFLPA as a financial advisor. Wright’s business partner, Nelson “Keith” Bond, was also registered with the NFLPA. Wright’s hedge fund company, International Management Association, L.L.C., claimed to generate annual returns of approximately 27% by utilizing a strategy of short-selling stocks. In reality, Wright was running losing money and scamming investors. On May 21, 2008, Wright was convicted of 47 counts of fraud and money laundering for running a $150 million Ponzi scheme. While awaiting sentencing, on May 31, 2008, Wright hung himself from a self-made rope in his jail cell.
Athletes that lost money with Wright and Bond include six former NFL players: Steve Atwater, Blaine Bishop, Roy Crockett, Carlos Emmons, Clyde Simmons, and Al Smith. The players later sued the NFLPA for negligently adding Kirk Wright, and his business partner Keith Bond, to the list of Registered Financial Advisors, even though the two had several state and Federal tax liens and civil judgments against them. The players also alleged that Wright and Bond did not hold licenses to be financial advisors. That case was later dismissed by the federal court. Our investigation was able to find that Wright did hold an investment advisory license, but could not find any investment licenses for Bond.
As part of the Ponzi scheme, Wright was sending out fake monthly statements. Wright allegedly had four sports cars, multiple residences, flashy jewelry, and a $500,000 wedding. As typically seen with athlete fraud, Wright used NFL players to recruit additional players as investors. According to news articles, Steve Atwater, a defensive back for the Broncos and originally the Jets, joined Wright’s firm as a client liaison.
2. Jeffrey Rubin
From approximately 2000 through 2009, Rubin operated Pro Sports Financial, a Florida- based company that provided investments, insurance, and financial-related “concierge” services for professional athletes. According to a report from journalist Rand Getlin, Rubin had at least 45 NFL players as clients.
In 2013, Rubin was barred for life by FINRA. FINRA found that based on Rubin’s referral, approximately 32 NFL players invested (and lost) approximately $40 million in a now-bankrupt casino in Alabama. At the time that Rubin helped raise $40 million for the casino, gambling was illegal in Alabama. FINRA also found that Rubin made unsuitable recommendations to an NFL player and that Rubin recommended that the player invest the majority of his liquid net worth in a concentration of illiquid, high-risk securities, including the Alabama casino. As a result, the player lost approximately $3 million.
In addition, FINRA found that Rubin participated in those private securities transactions without providing prior written notice to, or obtaining prior written approval from, his employer member firm. In return for these referrals and other work for the casino project, the promoter of the casino project gave Rubin a four percent ownership stake in the project and at least $500,000.
Investors in the casino included Fred Taylor, Frank Gore, Jevon Kearse, Edgerrin James, Terrell Owens, Plaxico Burress, Duane Starks, Devin Thomas, Santana Moss, Greg Olsen, Greg Jones, Roscoe Parrish, Eric Winston, Hanik Milligan, Jerome McDougle, Chris Myers, Lito Sheppard, Jabar Gaffney, Jacob Bell, Sinorice Moss, Damione Lewis, Kenard Lang, Clinton Portis, Drew Stanton, Gabe Watson, and Peter Warrick.
Despite being registered with the NFLPA as a financial advisor, red flags were present in Rubin’s background leading up to Rubin’s downfall. In 2004, Rubin or the company that employed him at the time, settled a customer complaint against filed by former NFL linebacker Johnny Rutledge for $40,000. Rutledge claimed that his signature was forged on an insurance document that cost him $119,000. The settlement was publicly available on Rubin’s BrokerCheck report.
On April 9, 2008, the Internal Revenue Service filed a federal tax lien against Rubin in the amount of approximately $441,000. On June 2, 2009, the IRS filed a second tax lien against Rubin in the amount of approximately $117,000. From the time they were filed to at least March 10, 2011, the liens remained unsatisfied.
According to an article by Rand Getlin, Rubin’s personal life also raised questions. In July 2005, his on-again, off-again fiancé, 21-year-old Elizabeth McClure, died of a drug overdose after she mixed crack cocaine, prescription medication and alcohol, according to the Broward County medical examiner’s report.
By 2008, Rubin became a regular at Automatic Slims, a nightclub in Fort Lauderdale. After the club closed, Rubin allegedly borrowed money to become a part-owner and re-opened the spot under the name SHO. Rubin also purchased a $2.8 million waterfront home in Lighthouse Point, Florida. In June 2005 Rubin acquired a Mercedes 550 sedan and a Lamborghini Gallardo Spyder.
After Rubin’s downfall began, in September 2011, Rubin and assistant Mike Kneuer were arrested on the Alabama casino property on charges including possession of marijuana, Xanax and a substance local police believed was GHB.
3. Kurt Barton
Kurt Barton was founder and president of Triton Financial, Inc. According to an article by Darren Rovell of ESPN, Barton was formerly registered with the NFLPA as a financial advisor and swindled money from NFL players Eagles Kevin Kolb, Brent Celek and David Akers. According to Rovell, Barton passed background checks, even though it was later found that he did not graduate from Colorado State University as he said he did.
Barton was sentenced to 17 years in federal prison for carrying out a Ponzi scheme which victimized more than 300 investors and resulted in a total estimated loss to investors of over $50 million. Barton was also ordered to pay restitution in the amount of $63,707,496. On August 17, 2011, a federal jury convicted Barton of several crimes, including conspiracy to commit wire fraud, money laundering, and securities fraud.
Barton’s scheme represented to investors, including members of his family, members of the Church of Jesus Christ of Latter Day Saints, and professional football players, that Triton was purchasing properties, businesses and other assets with their funds when, in fact, he was using their money to satisfy the needs of other ventures and the need to pay quarterly dividends or redemptions to prior investors. To conceal his Ponzi scheme, Barton created fake E*Trade monthly account statements and gave them to financial institutions, commercial lenders and potential investors. According to the FBI, Barton used NFL players to market his company and then recruit more victims for his Ponzi scheme.
4. Jinesh “Hodge” Brahmbhatt
Hodge Brahmbhatt, once registered in the NFLPA financial advisor program, operated Jade Private Wealth Management, a McLean, Virginia-based registered investment advisory firm that specialized in working with professional athletes. It is believed that Brahmbhatt and his employees at Jade managed investments for upwards of 70 professional athletes.
Brahmbhatt’s downfall came after two of the investments that he sold to clients, which were both promissory notes, stopped making scheduled interest payments and/or returning principal upon maturity. One of the promissory notes sold to clients was issued by Success Trade, Inc., which was the parent company of Brahmbhatt’s broker-dealer, Success Trade Securities, Inc. Clearly, a conflict of interest existed when Brambhatt was selling promisorry notes of his own broker-dealer’s parent company.
According to a report by Rand Getlin, Brahmbhatt’s firm had more than 30 athletes who purchased around $12 million of the high interest Success Trade, Inc. promissory notes that were eventually deemed by regulators to be a Ponzi scheme. Some of those investments purportedly generated interest returns between 11 and 26 percent.
During a 25-month investigation, Getlin identified multiple athletes that purchased promissory notes from Success Trade. Among those players were tight end Vernon Davis, Joe Haden, Clinton Portis, Adewale Ogunleye, Jared Odrick, Pat Sims, Fred Evans and Brandon Knight (NBA).
According to the FINRA, Brahmbhatt and representatives of Jade sold fraudulent promissory notes to players as a quid pro quo for the brokerage firm paying its operating expenses. Success Trade made a “loan” of $1.25 million to Jade.
In 2013, Brahmbhatt was barred for life by FINRA. FINRA found that from at least April 2009 to April 2013, Brahmbhatt was a registered representative with Success Trade and during that time, he met with Success Trade customers and discussed Success Trade’s promissory note investment.
On April 10,2013, FINRA filed a Complaint against Success Trade and its CEO and President, Fuad Ahmed, alleging that the firm and Ahmed engaged in an $18 million fraud in connection with the sale of the promissory notes. Brahmbhatt failed to cooperate with FINRA’s investigation, a violation of FINRA Rules 8210 and 2010, and was banned for life by FINRA.
Aside from the investment in Success Trade, Brahmbhatt was also selling promissory notes of a McLean, Virginia-based company, CFP Group, Inc. (“CFP Group”). CFP Group was located one floor above Brahmbhatt’s firm.
CFP Group was described to the players as a fire protection company specializing in fire protection engineering, construction, maintenance, inspection and repair of fire alarm and fire suppression systems for the U.S. Government. The athletes were told that CFP Group performed work on behalf of the General Services Administration (GSA), the U.S. Veterans Administration (VA), the U.S. Air Force and the Army Corps of Engineers.
The CFP promissory notes paid double-digit interest rates to the athletes. Devon Still, Drew Gooden (NBA), Thomas Jones, Brandon McKinney, and Timothy Jennings are among the investors that lost money investing in CFP Group. According to public legal records, Thomas Jones obtained a $700,000 judgment against CFP Group; Drew Gooden obtained a $484,093 judgment; Tim Jennings obtained a $430,590 judgment; Brandon McKinney obtained a $305,930 judgment; and Devon Still obtained a $111,933 judgment. It is highly unlikely that any player will be able to collect on their judgments.
As with many investments gone bad, there were red flags that the financial advisor selling the promissory notes should have caught. For example, CFP Group allegedly told investors that its profit margin was near 30%. A phone call by this office to a competitor of CFP Group revealed that the actual profit margin of the industry is closer to three percent, making CFP Group’s claim of 30% highly unlikely. A profit margin of 30% seems large on its face for a highly competitive industry.
Another example is that CFP Group should have been able to borrow money from banks and factoring companies at very low rates against its government contracts. Many factoring companies are willing to loan against government receivables at a rate near the risk-free rate. It would not make sense for CFP Group to pay double-digit interest rates to athletes, when it could go to a bank or factoring company for loans.
Also, in 2009, CFP Group agreed to pay the United States Department of Justice $150,000 to settle claims that it used false statements to obtain a contract from the Department of Veterans Affairs. This should have been concerning to the financial advisor selling the notes. In addition, CFP Group never filed a Form D with the SEC, which is required when raising money through a private placement.
Also, CFP Group had state and federal tax liens for unpaid taxes, going back to 2011. On December 1, 2011, a state tax lien in the amount of $71,358 was entered against CFP Group. On June 20, 2012, a federal tax lien in the amount of $10,436 was entered against CFP Group.
All of the red flags could have been easily uncovered. At a minimum, the financial advisor selling the notes was grossly negligent in recommending that the players invest in the promissory notes.
According to public records, athletes that brought FINRA arbitrations against Brahmbhatt include Larry English ($250,000 of losses), Ryan Williams ($400,000 of losses), Devon Still ($50,000 of losses), Orlando Franklin ($200,000 of losses), and Samuel Young (NBA) ($500,000 of losses).
Red flags were available surrounding Brahmbhatt prior to his downfall. In 2003, a former NFL player, Darryl Pounds, brought a FINRA arbitration against Brahmbhatt and his former firm, Merrill Lynch, alleging unsuitable recommendations, fraud, failure to supervise, negligence, and violation of state and federal securities laws. That case was settled on or around September 2005.
According to public records, in October of 2009, Wells Fargo Bank brought a foreclosure action against Brahmbhatt in Miami, Florida. That case was dismissed in June of 2010.
In 2006, Brahmbhatt purchased a $2.6 million home in Otomac. Brahmbhatt had a house bigger than many of his athlete clients. Brahmbhatt was rumored to also drive expensive cars, wear expensive clothes, and entertain clients and potential clients in nightclubs.
5. Aaron Parthemer & Sylvester King, Jr.
Aaron Parthemer and Sylvester King, Jr. were business partners at Morgan Stanley Smith Barney and later Wells Fargo Advisors. Both Parthemer and King were once-registered in the NFLPA Financial Advisor program.
The team’s downfall came after raising money from client, which is prohibited, for a nightclub on South Beach, a start-up t-shirt company, and a strip club in Miami. Parthemer ran the day to day operations of the nightclub while working for Morgan Stanley.
On April 22, 2015, Aaron Parthemer entered into a Letter of Acceptance, Waiver, and Consent (“AWC”) with FINRA, barring him from associating with any FINRA member in any capacity for life. The AWC stated that from June 2009 through March 2013, Parthemer engaged in several undisclosed outside business activities, loaned nearly $400,000 to three firm customers without permission from his firm, presented an undisclosed private securities transaction in which eight firm customers ultimately invested more than $3 million [the start-up company] and, on multiple occasions, provided false information and false documents to Morgan Stanley, Wells Fargo, and FINRA.
Sylvester King was suspended for 18 months and fined $25,000 by FINRA. According to his AWC, from July 2009 through November 2012, King circumvented Wells Fargo’s policies and procedures by assisting another registered representative [Parthemer] in concealing nearly $400,000 in loans to three firm customers, loaned $25,000 to a firm customer without permission from his firm, participated in an undisclosed securities transaction in which eight firm customers invested more than $3 million, and provided false information to Morgan Stanley on two separate questionnaires.
Seven professional athletes have brought claims against Morgan Stanley and/or Wells Fargo for failing to supervise Parthemer and King. In June 2016, two former professional athletes, Keyon Dooling and John St. Clair, won a FINRA arbitration against MSSB relating to Dooling’s investment in Club Play South Beach and both claimants’ investments in GVC. The Panel of three South Florida attorneys found MSSB liable for “negligent supervision” and awarded it to pay $608,300 to Dooling and $206,000 to St. Clair, plus $5,000 in expert witness fees.
In June of 2015, former NFL player Asante Samuel and lottery winner James Groves brought a FINRA arbitration against MSSB relating to both claimants’ investments in GVC. According to regulatory records, MSSB settled those claims for $1,100,000. In addition, according to regulatory records, Samuel and Groves currently have another FINRA arbitration pending against MSSB for $7,818,162 relating to losses in the same South Beach nightclub.
In addition, professional athletes Justin Durant, Matthew Forte, Antoine Bethea, and Kendall Langford have brought a FINRA arbitration against Morgan Stanley seeking damages relating to their investments in GVC. That arbitration is still pending.
In 2016, another former NFL player filed a FINRA arbitration against Morgan Stanley relating to a $205,000 investment in the South Beach Nightclub.
There were some red flags surrounding Parthemer and King prior to their downfall. Parthemer ran a nightclub, drove a Bentley, and had flashy jewelry. Upon information and belief, King never had a college degree and would not have qualified to be on the NFLPA list, despite being on the list.
6. Jonathan Schwartz
Jonathan Schwartz was a “business manager” for GSO Business Management, LLC., a business management firm located in Los Angeles, California. On May 17, 2016, it was announced that singer Alanis Morissette brought a lawsuit against GSO and Schwartz. Morissette claimed that Schwartz embezzled at least $4.7 million of cash from her account. According a June 2016 article in the Los Angeles Times, Morissette and GSO settled the lawsuit.
In a separate lawsuit, GSO sued Jonathan Schwartz on May 16, 2016. According to that lawsuit, “Schwartz was burning through money to sustain a lavish lifestyle, including a $50,000 vacation to Bora Bora and an outstanding gambling debt of $75,000 at a casino in the Bahamas.” The complaint also alleged that he owed the U.S. government a “substantial sum” for unpaid taxes. Among other things, the lawsuit sought to remove Schwartz as a member of GSO and damages relating to the Morissette lawsuit. In addition, the lawsuit sought $588,000 for advance payments that GSO allegedly made to Schwartz.
On May 20, 2016, the NFLPA issued a memo alerting players and agents as to the two lawsuits against Schwartz. The memo also stated that Schwartz “was an NFLPA Registered Financial Advisor” and his “request for registration in 2016 has been denied.”
7. Ash Narayan
Narayan was an investment advisor and managing director in the California office of Dallas-based investment advisory firm RGT Capital Management. Narayan is also a licensed attorney in the State of California. Narayan was an NFLPA Registered Financial Advisor. According to the SEC, he held himself out as a CPA even though he was not one.
In 2016, the SEC obtained a court order freezing the assets of Narayan and also charged him with secretly siphoning millions of dollars from accounts he managed for professional athletes and investing them in a failing online sports and entertainment ticket business, The Ticket Reserve.
The SEC’s complaint alleged that Narayan transferred more than $33 million from clients’ accounts to The Ticket Reserve, mostly without their knowledge or consent and often using forged or unauthorized signatures. According to the SEC’s complaint, the Ticket Reserve became dependent on the fraudulent cash infusions from Narayan’s clients to stay in business. Narayan received nearly $2 million in hidden compensation from the company, most of it directly traceable to funds stolen from his clients.
According to the SEC’s complaint, The SEC alleged that Narayan’s clients trusted and relied upon Narayan to pursue safe, conservative investments that would not put their principal at risk, realizing that as professional athletes with injury risks, their earnings might occur within a short window.
According to the SEC, besides failing to disclose the bulk of The Ticket Reserve investments to his clients and the fees he was receiving in exchange for investing their money, Narayan failed to disclose other key conflicts of interest-including that he was a member of The Ticket Reserve’s board of directors and owned more than three million shares of company stock.
The Ticket Reserve’s executives participated in the scheme by making undisclosed finder’s fee payments to Narayan out of his clients’ funds and covertly describing them as “director’s fees” and “loans” in various company documents. According to the SEC, The Ticket Reserve approved and executed Ponzi-like payments, falsified and backdated documents, and created sham promissory notes between The Ticket Reserve and Narayan in attempts to further conceal the scheme.
The SEC’s complaint alleges that Narayan, The Ticket Reserve, and The Ticket Reserve’s executives violated antifraud provisions of the federal securities laws and a related SEC antifraud rule, and charged Narayan with violating the antifraud provisions of the Investment Advisers Act of 1940. The SEC sought disgorgement of ill-gotten gains plus interest and penalties as well as preliminary and permanent injunctions.
According to court documents, Narayan directed more than $30.4 million into the ticket business from three current and former athletes: $15.1 million from Jake Peavy (MLB); nearly $7.8 million from Mark Sanchez (NFL); and nearly $7.6 million from Roy Oswalt (MLB). According to court documents, other players that invested in The Ticket Reserve include Jason Castro (MLB), Tyler Matzek (MLB), Austin Croshere (NBA), and Bryce Drew (NBA).
Narayan was fired from his firm after the firm allegedly learned what Narayan had done. After the SEC’s complaint, the NFLPA suspended the registration of Narayan. In September 2016, Narayan tentatively agreed to settle with the SEC and pay back the $1,498,000 he received from The Ticket Reserve.
