Commission Settles Sports Betting Scheme Action

Offering fraud actions are typically one of the largest groups of cases brought by the Commission as we have often noted.  These cases are frequently centered on a scheme crafted and selected by those in charge of the offering to attract investor interest. The attraction to the investors is often key the scheme since if it fails the scheme fails.  In the Commission’s most recent case in this area the attraction was sports and specifically having been a member of or player with those involved with the Harvard University football team. SEC v. Palazzo,  Civil Action No. 5:24-6602 (ND. Ca.).

Defendants in this action are:  Nicholas Palazzo, a graduate of Harvard University where he played football and stayed in touch with former teammates and others who later joined the team;  4TA Sports, Inc. a firm controlled by Defendant Palazzo who was the firm CEO; NP Ventures Holdings, LLC, another firm controlled by Defendant Palazzo; and Play Caller Sports Gaming, LLC, also a defendant that was controlled by Defendant Palazzo.

Beginning in October 2019,  and continuing until the end of 2023,  Mr. Palazzo and his controlled entities  raised funds from investors.  During the period he focused on two schemes.  First, what the complaint calls the STACK scheme raised about $900,000 from three investors. Those solicited  were told the offering proceeds would be used to raise money to repurchase the assets of STACK Media, Inc. — a sports media entity.  Defendant Palazzo had previously sold in the firm. Supposedly Mr. Palazzo had, or shortly would have, $5 million to facilitate the repurchase process.

The claims were false.  The money raised was spent on personal items for Mr. Palazzo, not to reacquire an interest in STACK.

Second, is the Play Caller Scheme. Beginning in September 2020,  and continuing through the end of December 2023, Mr. Palazzo raised about $2.1 million.  Investors were told that their money would be used to develop and launch a sports betting operation.  Instead, the funds were used for other interests of Mr. Palazzo, including vacations, paying himself fees and to settle a lawsuit.   The complaint alleges violations of Securities Act Sections 17(a) and Exchange Act Section 10(b)(5) and Rule 10b-5 and Section 20(a).

Mr. Palazzo and the entity Defendants settled the litigation, each consenting to the entry of permanent injunctions based on the provisions cited in the complaint. Mr. Palazzo was also directed to pay disgorgement of $2,648,132.72 along with prejudgment interest with the corporate entities being liable for their part of that amount.  Mr. Palazzo also paid a civil penalty of $150,000. The final judgment also bars Mr. Palazzo from serving as a corporate officer for director for five years or from participating in the issuance, purchase and offer or sale of any security for a period of five years other than for his own account. See  Lit. Rel. No. 26343 (July 9, 2025).