$29.5 Million Sports Betting Scheme Unraveled by SEC
On August 30, 2019, the Securities and Exchange Commission (SEC) filed a complaint in the U.S. District Court of Nevada against John Thomas, 74, and Thomas Becker, 72. The SEC alleges Thomas and Becker ran a fraudulent $29.5 million sports betting investment scheme. The two men raised the funds from 600 investors across 40 states by “offering investors pooled investment contracts whereby [the investors] obtain the opportunity to share in the purported profits” from Thomas’ and Becker’s “proprietary sports betting system.”
Thomas and Becker communicated directly with investors about their ability to “grow money 10 times faster than Warren Buffet. . . .” In addition, Thomas “often encourage[d] investors to reinvest” to postpone repayment of the investors’ “principal and purported returns.”
However, roughly $11.6 million has been returned to investors out of the $29.5 million raised through investments. The SEC, in its complaint, alleges that the two men used investor money to fund their lifestyles and pay commission to brokers and agents. In addition, the two men would make Ponzi-like payments to other investors. Approximately two dozen investors have reported that “when their investment reached the target stated in the contract, Thomas failed to pay them.”
One fact that the SEC emphasizes is that the investor agreements specify that the money will be used for sports betting. The agreements do not indicate investor money will be used to “pay for anything else, including sales commissions or operating expenses.” In addition to Thomas and Becker, the complaint names Douglas Martin, Paul Hanson, Damien Ostertag, and six business entities. Offerings from the six entities were not registered with the SEC, which the SEC alleges is a violation of sections 5(a) and 5(c) of the Securities Act of 1933.
The SEC further alleges that Martin, Hanson, Ostertag and Executive Financial Services, Inc. are all unregistered brokers and acted in the capacity of a broker without being duly registered as brokers or associated with a registered broker. The SEC and FBI have been monitoring this sports betting scheme for over a year.
Following the filing of the complaint, the SEC moved for a preliminary injunction to have Thomas’ and Becker’s funds frozen while the case is adjudicated. However, Thomas and Becker requested the court deny the motion because the SEC has failed to show any evidence that the defendants engaged in acts to hide the assets or place out of reach of the SEC.
Thomas and Becker are no stranger to law enforcement. During the 1990s, the two pled guilty to federal charges for “selling copy machines that did not exist to financial institutions.”