It was touted as “the largest publicly traded diversified portfolio of professional sports teams in the world.” The firm actually owned interests in a U.K. football team and other sports teams. The company was put together by a former registered representative. In 18 months over 150 investors bought shares for a total of $6.5 million. While the firm was real, the sales pitch used to sell its shares was fraud, geared to the unsophisticated. SEC v. Oxford City Football Club, Inc., Civil Action No. 15-62584 (S.D. Fla. Filed Dec. 10, 2015).
Defendant Thomas Guerriero is a former registered representative who masterminded the scheme. Defendant Oxford was formed in 2003, as Smart Kids Group, Inc. Following a reverse merger in 2012 with a publicly traded company called WMX which offered executive training certificates in financial planning, the company changed its name to Oxford City Football Club, Inc. Oxford had acquired a 1% interest in an entity that operated Oxford City Football Club of Oxford, England. At the time of the merger Mr. Guerriero controlled both entities.
Oxford had two basic portfolios. One focused on professional sports teams. It had interests in the football club as well as a number of semi-pro indoor and outdoor soccer teams and a basketball team. Its second portfolio focused on academic institutions. It consisted of two schools which offered bachelors, masters and doctoral degree programs in economics and financial markets. The firm also claimed to have a media and entertainment portfolio that included a South Florida radio station and a real estate and property management portfolio. By the end of its first full year of operation Oxford reported just over $600,000 of revenue and a net loss of over $7 million.
Following a 4,000 to 1 reverse stock split at a time when the shares were trading for about a penny, Mr. Guerriero set up a call center. A sales team – referred to as consultants – was established to sell shares in Oxford. A basic script was developed and potential investor lists were acquired. The shares were not registered, although an exemption was claimed under Regulation D. Inquiry was not made to determine if the potential investors were accredited.
Investors were typically told that they could purchase the shares at a deep discount of about $1 or $2 per share, although the stock was trading at about $4 to $6. Investors were not told that the defendants artificially maintained the share price. Likewise, they were not told that since the shares were unregistered there was a holding period before the securities could be resold. Investors were told about a valuable real estate portfolio, a possible listing on the New York Stock Exchange, a dividend and financial projects that were very positive. The claims were false.
One approach used with investors was to secure their signature on a Subscription Agreement. Following their agreement to purchase shares certain investors received a three page agreement. The signature pages were supposed to attest to their accredited status. The appropriate boxes on the forms were all filled in. The signature pages were then added to the executed Subscription Agreement by the firm.
Other investors were sent a written confirmation of a claimed purchase after a telephone call in which they furnished basic identifying information to the firm. If the investor disputed the purchase he or she was told that there was a Verbal Verification System which had recorded the order and that it was legally binding.
Defendants have continued to solicit investors during the SEC’s investigation. On December 8, 2015 Mr. Guerriero furnished a potential investor with overstated profit projections and used other deceptive sales tactics. The complaint alleges violations of Securities Act Sections 5(a), 5(c) and each subsection of Section 17(a). It also alleges violations of Exchange Act Sections 10(b), each subsection of Rule 10(b)-(5), and 20(b). The case is pending.
