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777 Partners has been accused of hundreds of millions of dollars in fraud by one of its lenders, marking the latest setback for the Miami-based investment firm’s attempted takeover of Everton Football Club.
According to the lawsuit, filed Friday in federal court in New York, 777 owes more than $600 million in debts to London-based asset manager Leadenhall Capital and Leadenhall Life, an affiliated investment company.
Leadenhall is seeking damages after accusing 777 and co-founder Josh Wander of pledging more than $350 million in assets that “either did not exist, were not actually owned by Wander’s company, or were already pledged to another lender.” “.
“Wand admitted there had been a ‘mistake’ and [an] “Embarrassing” problem caused by 777 Partners’ outdated computer system,” the complaint states.
A spokesman for 777 declined to comment.
The lawsuit raises further questions about 777’s ability to complete the Everton deal after months of delays. Wander’s company was a pioneer of the so-called multi-club ownership model, which transformed football by buying shares in a number of football clubs.
Backed by Bermudian reinsurer 777 Re, 777 has acquired a portfolio of football club investments including Genoa in Italy, Vasco da Gama in Brazil, Hertha Berlin in Germany and Standard Liège in Belgium.
777 had aimed to complete its takeover of Everton by the end of last year, but has yet to receive approval from the Premier League, which states that 777 must meet a number of conditions for the takeover to take place.
The lawsuit portrayed Everton as “the latest shiny object in Wander’s fraudulent scheme.” It was claimed that Wander’s strategy was based on “using debt to acquire new assets, which he can then use as collateral for further debts which he then fails to pay off on time, in a seemingly endless cycle of robbing Peter.” to pay Paul.” ‘.”
Everton have moved up to 15th in the table, 11 points clear of the bottom three, the relegation zone that leads to relegation from the top flight. Clubs and their owners are fearful of leaving the Premier League because it will cut them off from lucrative broadcasting revenue.
Everton have built up a points cushion at a time when their finances are strained. The club’s net debt rose to around £330m at the end of June 2023, compared to £141m the previous year. Net losses rose to £89m in the year to June 2023, up from £38m a year earlier.
Everton’s lenders include New York-based MSP Sports Capital, which is part of a group that has provided £158m to finance the club’s new stadium in Liverpool. 777 is required to repay this loan as a condition of the acquisition. The other major lender is a company called Rights and Media Funding.
Separately, 777 has provided Everton with more than $200 million in loans since September last year to meet its working capital needs.
British-Iranian businessman Farhad Moshiri agreed to sell Everton after the club hit financial difficulties due to high spending on players and the new stadium, and revenues due to the pandemic and his decision to cut ties with sponsors linked to the in Uzbekistan-born oligarch Alisher’s decision to break off was diminished after Russia’s invasion of Ukraine.
But 777, Moshiri’s chosen buyer, has come under scrutiny from regulators, ratings agencies and the media. The company’s ties to A-Cap, an insurance group led by CEO Kenneth King, are also a concern.
Leadenhall’s complaint alleged that A-Cap was the “Wizard of Oz behind the curtain at 777 Partners.” Wander allegedly “disclosed on phone calls” that A-Cap had a senior “all-asset lien” on 777’s assets.
“Backed only by the auspices of A-Cap, the Company is positioned to attract new lenders and investors who will leverage the Company’s last-minute commitments – including 777 Partners’ own payroll – into ‘Whac-A-Mole ‘-style settlement.” “Keep 777 Partners’ creditors at bay, even if only temporarily, and prevent the entire plan from coming to public light,” the complaint says.
However, A-Cap, which was told by US regulators to reduce its exposure to 777, hit back in a statement to the Financial Times.
An A-Cap spokesman said Leadenhall’s claims were “sensational and baseless” and represented “another desperate attempt by Leadenhall to increase the seniority of its collateral and demand payments from A-Cap while maintaining A-Cap’s undermining policyholders.”
“A-Cap, similar to Leadenhall Capital, acts as a lender for 777 – there are no ownership ties. The key difference lies in the fact that A-Cap has priority rights to collateral related to 777,” it said.
“A-Cap will take all necessary measures to protect the interests of its policyholders and vigorously defend itself against these unfounded allegations,” the spokesman said.
Leadenhall did not respond to multiple requests for comment.