© 2016 The Texas Lawbook.
By Mark Curriden
(June 21) – The U.S. Securities and Exchange Commission’s Fort Worth Regional Office unveiled federal charges Tuesday against a former managing director of Dallas-based investment advisory firm RGT Capital Management for “secretly siphoning millions of dollars” from his clients, including two Major League Baseball star pitchers and an NFL star quarterback.
One of the victims, former Houston Astros and Texas Rangers All Star pitcher Roy Oswalt, lost $7 million in the alleged scheme, according to lawyers involved in the case.
Separate federal court documents unsealed Tuesday show that the victims of the alleged Ponzi scheme are Oswalt, current San Francisco Giants pitcher Jake Peavy and current Denver Broncos quarterback Mark Sanchez.
The SEC claims that Narayan used money from the accounts he managed for the professional athletes to fund a struggling online sports and entertainment ticket business he partially owned called The Ticket Reserve Inc. The SEC also charged Ticket Reserve CEO Richard M. Harmon and chief operating officer John A. Kaptrosky. Both men reportedly live in Chicago.
“Neither Rick Harmon nor his chief operating officer, John Kaptrosky, did anything wrong while Mr. Harmon was CEO of The Ticket Reserve, and they and the company were in fact victims of someone else’s alleged wrongdoing,” said Lanny Davis, a lawyer for Harmon. “Mr. Harmon and Mr. Kaptrosky look forward to continuing to cooperate with the SEC to resolve this matter as soon as possible.”
U.S. District Chief Judge Barbara Lynn in Dallas froze all assets of the three men, ruling that there is “good cause to believe that investor funds and assets obtained by the defendants from the unlawful activities described in the SEC’s complaint have been misapplied and will be misappropriated, hidden, wasted or otherwise used to the detriment of investors.”
“We allege that Narayan exploited athletes and other clients who trusted him to manage their finances. He fraudulently funneled their savings into a money-losing business and his own pocket,” Shipchandler said. “The asset freeze stops the uncontrolled spending of investor assets within The Ticket Reserve until the case is resolved, preserving money that rightfully belongs to Narayan’s clients.”
SEC and federal court documents show that RGT Capital Management officials fired Narayan when they discovered the possible scheme and reported it to the SEC. The Dallas financial advisory firm also filed a federal securities lawsuit two weeks in Chicago against Narayan, Harmon, Kaptrosky and Ticket Reserve. The case seeks to recover the money its investors lost. Baker Botts partners Van Beckwith and Kevin Sadler in Dallas represent RGT.
Ticket Reserve became dependent on the fraudulent cash infusions from Narayan’s unsuspecting clients to stay in business, the SEC claims. In exchange, Narayan received nearly $2 million in hidden compensation from the company, most of it directly traceable to funds stolen from his clients, federal documents state.
The SEC also said that The Ticket Reserve made Ponzi-like payments to existing investors using money from new investors. Since being fired from the investment firm where he worked and losing access to the clients’ accounts, Narayan is alleged to have been redirecting to The Ticket Reserve the sham fees he received out of the money taken from client accounts, the agency claims.
Narayan is represented by former federal judge Joe Kendall and Jamie Jean McKey and of the Kendall Law Group in Dallas.
SEC Assistant Regional Director Jessica Magee and senior trial counsel Chris Davis are leading the government’s prosecution of the case. The SEC investigation was conducted by Michael A. Umayam, Keith J. Hunter, and Carol J. Hahn.
Porter Hedges partner Eric Wade represents Jake Peavy in this matter.
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