In trying to explain how bad the 777’s latest legal trouble is for the Miami-based investment firm, it’s hard to know where to start.
The complainant this time is the London-based investment firm Leadenhall and the civil suit it has filed against 777 Partners, some of its portfolio companies, its co-owners Steven Pasko and Josh Wander, its close partner A-Cap and its boss Kenneth King runs to 82 pages. And there’s a wounded spirit on every page.
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But perhaps the easiest place to start is to simply say that this must surely be the end of 777’s almost eight-month attempt to complete the purchase of Everton, and quite possibly the end of 777 too.
After all, Leadenhall’s complaint, filed Friday in a U.S. District Court in New York, notes that 777 and its associated companies are already the subject of 16 separate lawsuits over unpaid debts totaling more than $130 million. Leadenhall, for what it’s worth, claims the group owes him more than $600 million.
Wow, right? But Leadenhall says 777 and its affiliates owe A-Cap more than $2 billion, not that he thinks A-Cap itself deserves any sympathy, as Leadenhall believes A-Cap is involved in the scam.
The central allegation is that 777 and its associated companies set up a credit facility with Leadenhall in 2021 secured by assets that were to be “free and clear” of all other potential claims. And the unencumbered status of these assets had to be confirmed to Leadenhall by the group every month. This allowed the 777 group to borrow large amounts of money from Leadenhall, at a relatively low interest rate.
However, a combination of anonymous tips, forensic accounting, conversations with other financiers and, even, admissions by Wander himself, the 777’s main man, led Leadenhall to the conclusion that what was going on here was “a giant shell game , at best, and at worst, a full-blown Ponzi scheme.”
The 777s’ deal to buy Farhad Moshiri’s 94.1% stake in Everton is subject to regulatory approval from the Premier League, FA and Financial Conduct Authority (Getty Images)
Instead of being “free and clear,” most of the 777 collateral either did not exist or was “double-lien.” Oh, and borrowers falsified documents and records to hide the deception, Leadenhall alleges.
The plan, as far as Leadenhall can understand, was to funnel money, usually borrowed money, into “speculative bets” on airlines, moneylenders and football clubs, with Everton being the biggest bet and important of all.
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“Everton is the latest shiny object in Wander’s fraudulent scheme, solvency aside,” the complaint says.
“Despite the fact that 777 Partners and many of the operating businesses and professional soccer teams owned by Wander are deeply in debt, behind on their obligations and in trouble with regulators, Wander’s strategy has been to continue expansion, using debt to acquire new assets which it can then use as collateral for further debts, which it then fails to pay off in a timely manner, in a seemingly endless cycle of ‘rob Peter to pay Paul’.”
This “house of cards” was supported, “Whac-A-Mole style” by King’s A-Cap, who, contrary to 777’s agreement with Leadenhall, had overall security over all of 777’s assets.
But, according to Leadenhall, King’s control of 777 goes far beyond that. He is the “puppeteer of Wander’s marionette” and the “Wizard of Oz behind the curtain of 777”. It’s A-Cap money that funded 777’s purchase of airlines and football clubs. It’s A-Cap money that paid Everton’s bills.
And when we say A-Cap money, what we really mean is that it’s the insurance premiums of millions of ordinary Americans, ordinary people who invested in health and retirement plans, people who thought their money would end up in plated investments in gold and copper. investments with a fund that would definitely be available to them as and when required.
Evertonians, do you agree with current owner Farhad Moshiri that these are the “best partners to take (your) great club forward”?
Obviously this is only a civil case. We are not yet at the criminal stage and perhaps we will never get there.
Wander and 777 declined to comment, but their usual line is to never comment on ongoing litigation.
A-Cap has not yet responded to a request for comment from Atletico but in a statement to the New York Times he said the allegations were “sensational and unfounded.” “A-Cap, similar to Leadenhall Capital, acts as a 777 lender – there are no ownership ties,” she said. “The key distinction is that A-Cap holds senior rights to the collateral associated with 777.”
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But A-Cap has already been forced to try to extricate itself from 777, under pressure from its ratings agency and state insurance regulators.
Good luck. I hope it goes well, if not for you but certainly for your customers, who didn’t sign up.
But could you conduct your financial engineering experiments away from our football clubs, please? They are not moles to whack, Peters to rob, or shells to play with.
It’s hard to see what 777 might say to respond to these claims. But whatever happens, for Everton, the FA and the Premier League, surely this is now too much.
It must be over. This must be the end.
(Top photo: Peter Byrne/PA Images via Getty Images)