With private equity in play across all major sports leagues and the rapid growth of the athlete economy, professional athletes seeking long-term investment opportunities should be aware of the unique risks and challenges.[i],[ii] Unlike sophisticated, repeat investors who know their way around the risk disclosures section of a private placement memorandum, the first risk for many athlete-investors with substantial income is selecting ethical representation.
Take, for example, the recent conviction of an investment adviser that defrauded an NBA All-Star (All-Star) and a retired NBA player of a combined $8 million.[iii] In late 2020, the All-Star expressed interest in purchasing the Atlanta Dream, a WNBA franchise, to his agent. In turn, the agent introduced the All-Star to an investment adviser to broker the deal, despite the adviser’s 2005 and 2014 fraud convictions.[iv],[v],[vi] With the agent’s help, the adviser convinced the All-Star to contribute $7 million to the fictitious investment opportunity, going so far as using different phone numbers, creating and controlling a shell company, and pitching a fabricated “vision plan” that falsely listed companies and celebrities that “supported” the All-Star’s ownership efforts.[vii] (Under similar pretenses, the agent and the investment adviser convinced a retired NBA player to invest $1 million in the development of an NBA rookie ahead of his 2020 draft.[viii]) Unfortunately, it wasn’t until ESPN reported the sale of the Atlanta Dream in 2021 that the All-Star learned of the fraud.[ix] The agent pled guilty to conspiracy to commit wire fraud upon indictment and was sentenced to time served.[x],[xi] Conversely, since his conviction in October 2024, the investment adviser has been sentenced to 12 years in prison, including five years of supervised release, and ordered to pay $8 million in restitution.[xii]
Investment Management Considerations
This recent conviction highlights several legal considerations for athlete-investors, including regulatory oversight, league-specific governance, and proactive measures to mitigate risk.
Regulatory Oversight. Under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), investment advisers must register with the Securities and Exchange Commission (SEC) and comply with specific conduct standards as a means to protect investors, unless otherwise exempted.[xiii],[xiv] Such standards include providing full disclosure of fees, commissions, and investment risks; avoiding conflicts of interest; maintaining accurate books and records; and undergoing examinations by the SEC.[xv],[xvi],[xvii],[xviii] Although some private offerings are exempt from registering with the SEC under Rules 506(b) and (c) of Regulation D, such offerings are disqualified from exemption if the issuer has a relevant criminal conviction, regulatory or court order, or other disqualifying event.[xix]
League-Specific Governance. Several professional sports leagues have created initiatives to protect players from financial fraud. Most notably, the NFL Players Association’s (NFLPA) Financial Advisor Registration Program connects players to qualified financial professionals who meet specific regulatory and ethical criteria.[xx] Other leagues, such as the NBA, WBNA, MLS, and NWSL, offer holistic financial literacy training through annual programming and partnerships.[xxi],[xxii],[xxiii],[xxiv]
Proactively Mitigating Risk as an Athlete-Investor. Athlete-investors should only work with an SEC-registered investment adviser and verify that adviser’s credentials and disciplinary history through FINRA’s Investment Adviser Registration Depository. Additionally, athlete-investors should complete thorough due diligence on every investment opportunity before contributing capital. This includes consulting with attorneys and tax professionals, and leveraging the initiatives provided by their respective leagues. Lastly, to catch irregularities early, athlete-investors should regularly monitor their investment portfolios and conduct periodic audits of their financial statements.
Taken together, the proactive employment of these tactics may have prevented the NBA All-Star from falling for the convicted adviser’s fraudulent scheme. Under the facts of that case, we know that the adviser was not an investment advisory representative with a registered investment advisory firm or any other professional league, nor was he issuing a Rule 506 private offering – rather, the adviser was a defunct businessman with a history of federal fraud convictions and a penchant for luxury.[xxv],[xxvi] Still, the adviser and the agent are just the tip of the iceberg for government prosecution. This year, another investment adviser will stand federal trial for allegedly defrauding three current and former NBA players of a combined $13 million.
While all investments carry some risk, and although the athlete economy is replete with unique challenges, sports as an asset class has steadily become a $3 trillion market. Athlete-investors should feel empowered to join the fray. With the proper legal and financial protections, athlete-investors will make informed decisions and contribute to their long-term prosperity.
[i] The National Football League was the last major American sports league to approve private equity investments in team ownership. Brendan Coffey et al., “NFL Owners Approve Private Equity Deals, Unlock Billions,” Sportico, August 27, 2024.
[ii] In 2022, the global sports industry contributed over $403 billion to the economy, with a compounded annual growth rate of 9.13%. By 2028, the economic impact of the global sports economy is expected to yield over $680 billion. Statista, “Sports Industry Revenue Worldwide in 2022, with a Forecast for 2028,” statista.com (May 22, 2024).
[iii] United States v. Darden, 23-CR-134 (VSB) (S.D.N.Y. Oct. 17, 2024)
[iv] Briscoe also introduced Howard to Calvin Darden Sr., a retired top executive at United Parcel Service whom Darden Jr. repeatedly impersonated to add credibility to his fraudulent schemes. The elder Darden has not been financially implicated in his son’s criminal activity. Darden, 23-CR-134; Nate Raymond, “N.Y. Man Gets Year in Prison for Maxim Magazine Deal Fraud,” Reuters.com, July 18, 2016.
[v] In 2005, Darden Jr. pled guilty to four counts of grand larceny and one count of scheming to defraud over $7.16 million from eight investors and three employers, by deceptively claiming to manage the assets of several celebrities and professional athletes. Further, Darden Jr. falsely represented to a Taiwanese company that he would arrange an NBA exhibition game in Asia in exchange for a $500,000 investment. Darden Jr. served about 4.5 years in prison. ALM, “N.Y. Stockbroker Pleads Guilty in Multimillion-Dollar Scam,” Law.com, August 5, 2005; Raymond, supra note 4.
[vi] In 2014, following his first release from prison, Darden Jr. pled guilty to wire fraud charges for organizing a fraudulent investment scheme for the purported purchase of Maxim magazine in which he impersonated Darden Sr. U.S. District Judge Jed Rakoff sentenced Darden Jr. to one year in prison. United States v. Darden Jr., No. 14 MAG 283, (S.D.N.Y, Nov. 4, 2014).
[vii] At trial, Howard testified that the fraudulent “vision plan” increased his confidence in the purported deal. Michael McCann, “Dwight Howard’s WNBA Swindler Faces Lengthy Prison Sentence,” Sportico.com, January 24, 2025.
[viii] McCann supra note 7.
[ix] McCann, supra note 7; “WNBA Approves Sale of Atlanta Dream to Larry Gottesdiener,” Dream.WNBA.com, February 26, 2021.
[x] Pete Brush, “Ex-NBA Agent Avoids Prison For Forging Player's Signature,” Law360.com, February 16, 2024.
[xi] As of his indictment on March 23, 2023, Briscoe is no longer a National Basketball Players Association certified player’s agent. Mike Vorkunov, “Ex-NBA agent among 4 charged with schemes to defraud pro basketball players,” NYTimes.com, March 23, 2023.
[xii] The Darden Court remanded Darden Jr. to jail on December 23, 2024, after several violations of his bail conditions, including engaging in transactions greater than $1000 by trying to obtain a $3.1 million mortgage. McCann supra note 7.
[xiii] 15 U.S.C. § 80b-1 (2010).
[xiv] Under the Advisers Act, certain advisers need not register with the SEC, including, but not limited to some private fund advisers, venture capital fund advisers, some foreign advisers, banks, lawyers, accountants, engineers, and/or teachers, registered broker-dealers, publishers of bona fide newspapers, family offices. 15 U.S.C. § 80b-3(b) (2010).
[xv] 15 U.S.C. § 80b-4(b) (2010).
[xvi] 15 U.S.C. § 80b-4(c) (2010).
[xvii] 15 U.S.C. § 80b-6 (2010).
[xviii] 15 U.S.C. § 78a et seq. (2010).
[xix] 17 CFR § 230.506(b)-(d) (2012).
[xx] National Football League Player Association, “Regulations and Code of Conduct Governing Registered Player Financial Advisors,” NFLPA.com, May 2023.
[xxi] Shaun Powell, “NBA Hosts Annual Rookie Transition Program for League’s Newcomers,” NBA.com (July 11, 2023).
[xxii] WBNA, “U.S. Bank and WNBA Partner with Project Destined for First All-Female Mentor Program She’s Invested: Supporting Emerging Female Leaders,” WNBA.com (May 31, 2022).
[xxiii] MLS, Player Engagement, “Resources,” MLSSoccer.com (March 16, 2025).
[xxiv] NWSL, “A New Era Of Professional Development for Athletes: NWSL and UKG Launch ‘Beyond the Field,” NWSLSoccer.com (June 18, 2024).
[xxv] Darden Jr. was a registered investment broker from March 2000 to October 2003. FINRA, “BrokerCheck Report – Calvin Ramarro Darden Jr.,” (March 16, 2025).
[xxvi] Over the course of his criminal activity, Darden Jr. used stolen funds to purchase a $2.8 million mansion with a 20-foot-long aquarium for sharks and an in-house theater, a Rolls-Royce, Mercedes G63, Porsche 911 Turbo S, Lamborghini Aventador, jewelry, and other luxury items. ALM supra note 5; Raymond supra note 4; McCann supra note 7.
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