Feds probe sports investor 777 over money flows

The federal prosecutor who won a conviction against Sam Bankman-Fried is overseeing a Justice Department investigation into sports buyer 777 Partners, whose entanglement with U.S. investors has raised questions about its already murky finances.

Nicolas Roos is part of a DOJ team probing whether 777 violated U.S. money-laundering laws, among other infractions, in its quick rise from an unknown investor in lump-sum legal settlements to an owner of sports teams around the world, people familiar with the matter said.

The Southern District of New York, where major financial-fraud cases tend to land, is discussing a joint investigation with law enforcement in Miami, where 777 is based, some of the people said. SDNY declined to comment. A spokeswoman for Florida prosecutors didn’t return a request for comment.

777 began buying up middling sports teams in Europe and Latin America in recent years, but took center stage this fall when it bid for Everton FC, one of England’s oldest and most financially troubled soccer clubs. Questions about the source of its money and the health of its operations, which had once swirled quietly in soccer circles, took on larger prominence across the sports and finance worlds.

Semafor has reported that much of 777’s money comes from various insurance operations, much of it bankrolled by a U.S. insurer whose CEO held significant sway over its operations and, on at least one occasion, received a personal loan from the firm.

Roos has prosecuted a series of high-profile cases, including convicting Nikola founder Trevor Milton, trying Steve Bannon for allegedly stealing donations to build a border wall, and making the case against the first pharmaceutical executive criminally charged with opioid trafficking.

The DOJ probe is in its early stages and may not lead to further actions. In response to a request for comment, an attorney representing 777 said the firm “considers these scurrilous and damaging accusations to be deliberately timed to undermine its ongoing commercial activities, including the ongoing period of regulatory approvals for the proposed acquisition of Everton FC.”

The questions continue to pile up around 777, which has gone from being a sports-world curiosity to an investment firm with a string of unpaid debts, dozens of interlocking financial entities, and a silent partner in a U.S. insurance firm — a tightly regulated industry that’s become a focus for financial watchdogs. The staid business of retirement and life insurance has caught the eye of private investment firms, which see its policy premiums as fuel for buyouts and other riskier deals.

There’s also the matter of 777’s significant related-party dealings, a category that tends to get law enforcement’s attention. Reporting by Semafor and others shows a web of often circular money trails, including a round-tripped loan that was eventually used to buy a luxury Miami condo.

777’s activities may yet be of interest to other government agencies. Two of its largest funders are Utah insurance companies. A spokesman for the state’s commissioner said it “regularly analyzes and examines the financial condition of the insurers it regulates. This helps assure that they are ready and able to pay the claims of their policyholders.”

The Financial Conduct Authority, the U.K.’s main financial regulator, is also reviewing 777, which has failed to provide audited financials to support its purchase of Everton, The New York Times has reported.

The investment firm must also pass a “fit and proper” test with the English Premier League, which last month hit Everton with a 10-point penalty for breaching the league’s financial rules. Those allegations are unrelated to, and predate, 777’s bid and concern around how it treated interest payments for its mountain of debt.

• “As Roos spoke, the jury was focused very closely on him. No one appeared to be napping.” — The Verge
• “Like a lot of the cash sloshing around private equity these days, much of 777’s money comes from an unlikely and pedestrian source: insurance.”