The US regulator has charged a financial advice firm that defrauded former professional NFL players who had joined a class action against the league seeking compensation for brain injuries suffered during their careers.
Tallahassee-based Cambridge Capital Group Advisors and its two former principals have been charged by the Securities and Exchange Commission with defrauding investors, most of which were retired NFL players.
The firm and its then-principals Philip Timothy Howard, the attorney representing the NFL players in the class action, and Don Warner Reinhard allegedly took over $6 million from around 20 retired NFL players to invest in two private hedge funds managed by Cambridge Capital Group Advisors from October 2015 to March 2017.
More than half of the retired players rolled over their NFL 401(k) accounts to invest in the hedge funds, the SEC said.
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According to the SEC, Reinhard, Howard and the firm advertised the funds would invest in a variety of instruments but in fact invested almost exclusively in settlement advance loans to more than 70 of Howard's NFL class action clients.
Close to $1 million of the funds were used by Howard to pay his personal mortgage loans and never repaid. Howard and Reinhard also used the funds to pay themselves fabricated broker fees on settlement advance loans to Howard's clients, the SEC said.
The hedge funds were operated out of Howard's law offices, the SEC said.
In addition, the regulator pointed out that Reinhard had been previously banned by the SEC as well as jailed for bankruptcy and tax fraud. He had also been barred by the SEC from ever again working for an advice firm.
"We allege that Cambridge, Howard and Reinhard defrauded these particularly vulnerable investors, many of whom invested their retirement savings," SEC director, Miami Regional Office, Eric I. Bustillo said.
"Instead of investing all of the funds' assets as promised, Howard and Reinhard used a significant portion of investor money to line their own pockets."