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California Based Financial Adviser Charged with Defrauding Professional Athletes

On May 24, 2016, the Securities and Exchange Commission (“SEC”) charged Ash Narayan (“Narayan”), a California based investment adviser registered with RGT Capital Management (“RGT”), with fraud for secretly siphoning millions of dollars from investment accounts he managed for professional athletes, including NFL quarterback Mark Sanchez (“Sanchez”).

The SEC’s complaint (the “Complaint”) alleged that Narayan defrauded Sanchez, and MLB pitchers Jake Peavy and Roy Oswalt, of more than $33 million.  Narayan allegedly transferred the money to The Ticket Reserve, a struggling online sports and entertainment ticket business, without the knowledge or consent of the athletes he represented and often with forged signatures.  Narayan also inappropriately failed to disclose the fees he was receiving in return for investing the bulk of their money in the struggling company, that he himself owned more than three million The Ticket Reserve shares, and that he was a member of the company’s board of directors.

The Complaint stated that Narayan exploited the trust of athletes who relied on him to manage their finances.  Sanchez, for example, had his NFL paychecks deposited directly into his investment account managed by Narayan.  While professional athletes have high earning potential, they often only have a short window in which to earn money.  As a result, Sanchez and other athletes rely on financial advisors to pursue conservative interments that preserve their capital.  The Complaint stated that Narayan’s fraudulent investing did not adhere to this conservative investment objective.

The SEC also charged The Ticket Reserve’s CEO, Richard M. Harmon (“Harmon”), and the COO, John A. Kaptrosky (“Kaptrosky”), with allegedly participating in Narayan’s scheme.   The Ticket Reserve became dependent on the cash infusions from Narayan’s unsuspecting clients to stay in business, and as a result, paid Narayan close to $2 million in finders fees out of the client’s own funds to ensure the cash continued to flow into the company.  Harmon and Kaptrosky disguised the fees paid to Narayan as “director’s fees” and “loans” in company documents to avoid suspicion.

The Complaint specifically alleged that “Narayan, The Ticket Reserve, Harmon, and Kaptrosky violated antifraud provisions of the federal securities laws and a related SEC antifraud rule, and charge[d] Narayan with violating the antifraud provisions of the Investment Advisers Act of 1940.”  The SEC now seeks disgorgement of the fraudulent gains plus interest, penalties, and a permanent injunction against Narayan.

The attorneys at Lax & Neville LLP have extensive experience in successfully prosecuting claims on behalf of professional athletes who have suffered losses as a result of investment and securities fraud. If you are a victim of fraud, please contact Lax & Neville LLP today at (212) 696-1999 to schedule a consultation.