John Elway Throws $15mil into Ponzi Scheme

Former Broncos quarterback John Elway and his business partner invested 15 million with hedge fund manager Sean Mueller. It later turned out that Mueller’s company “only had $9.5 million in assets in April and $45 million in liabilities,” despite the fact that 65 people invested $71 million with it over a 10-year period, writes the Denver Post. Here’s more from the Wall St Journal:

According to the filing, Messrs. Elway and Pierce had invested with Mr. Mueller for many years, but met with him in February to discuss setting up a separate fund that would make more conservative investments than the day-trading investments Mr. Mueller primarily pitched.

Messrs. Elway and Pierce then wired millions of dollars to Mr. Mueller in March 2010, “after receiving assurances from Mueller that the New Funds would not be mingled with any other funds … to be held in trust, in their respective names, in an account at Morgan Stanley,” their filing said.

“The New Funds were to be held in a constructive trust … for Intervenors until they determined an agreed upon course of conduct,” the filing said. One month later, Mr. Mueller was accused of running a Ponzi scheme. Messrs. Elway and Pierce said they approached the receiver of Mr. Mueller’s assets with their demands and haven’t received their money. Their motion doesn’t include any written documents on their deal with Mr. Mueller.

I don’t think any of the people who had trusts with Bernie Madoff ever got their money back in a prioritized way. I wonder what motivates people to try.

  • i was just reading about ken starr and all of his shenanigans in vanity fair last pm. seems strange how people could be so . . . careless?

  • MusicLawyer

    If it is held in trust in a segregated account in the name of the individual, as opposed to an investment in a fund or a company, then they should be able to retrieve those assets because the individual always retained title to the funds.

    I’m not securities attorney but I’m pretty certain that when one of these funds goes under, there is a distribution of the fund’s (or holding company’s) assets in order of priority (secured vs. unsecured, etc.) just like any liquidation. However, if the fund/company did not own the assets then they are not subject to distribution to all the other creditors, which is why Elway’s situation may be different.