Problems of fraud and other malfeasance are likely to increasingly concern financial advisors as money pours into sport.

The following article comes from Jon Felce (pictured below), partner at Cooke, Young & Keidan, a London-based law firm. The author examines problems of financial fraud that sportsmen and women suffer, and how the image of fallible or gullible sports stars is often inaccurate and unfair. What to do about it? The author has a few suggestions.

This article also falls in line with this publication's interest and previous coverage – on a variety of aspects – of the intersection of sports and wealth. We are pleased to share this article and hope it stimulates debate. Jump into the conversation! Email tom.burroughes@wealthbriefing.com The usual disclaimers apply to views of outside contributors.

For every Michael Jordan and George Foreman, there is a Mike Tyson and a Diego Maradona – famous (and less famous) sporting superstars who have faced financial ruin during or after their career has ended. Indeed, it was recently reported that an estimated 40 per cent of footballers are at risk of bankruptcy within five years of retirement. EY research in 2021, based on publicly available data, found that from 2004 to 2019 professional athletes alleged that they had almost $600 million in fraud-related loss. With the difficulties in detecting fraud and the reticence of victims to publicly acknowledge being defrauded, the figure is likely to be far higher. 

Many others, Gary Lineker and David Beckham amongst them, have become embroiled in disputes in relation to their financial activities. How has this become such a big problem? Is this symptomatic of issues unique to the sporting world or part of a wider phenomenon amongst the wealthy? Often, advisors are brought in to try and fix a situation, after an individual has fallen prey to poor advice. Understanding the nuances, and the potential legal recourse, is key to helping these individuals recover funds and get back on their feet. 

Much attention is given to the fallibility of the sports stars themselves. The classic attempt to explain their financial woes paints a picture where innocent and naïve individuals, from poorer backgrounds and with lesser education, are exposed to riches beyond their wildest dreams and opportunities that they simply do not understand – where film investments were the name of the day several years ago, it is now cryptocurrencies and NFTs. 

Without any experience of such monies, with time to kill, and caught up in a world of short termism and bling, they gamble away their fortunes – both literally and metaphorically. The situation is exacerbated when their short careers end – without any professional qualifications to fall back on, they struggle to find new roles to fill.

However, whilst such stories may play to the public perception of vastly overpaid sports stars who have it far too easy until it all goes wrong, the reality it seems is far more nuanced. The media may be quick to knock sports stars off their pedestals but, when one scrapes below the surface, in many of the sad tales of fallen idols there appears to be more at play. No doubt sports stars have their vulnerabilities, but more often than not they are as much a victim of the behaviour of others as a victim of themselves.

This is not unique to the sporting world. In the years in which I have been involved in fraud and asset recovery cases, it is striking how frequently wealthy parties are preyed upon by individuals with lesser abilities and morals. Sometimes these individuals are professional advisors, sometimes they are mere hangers on, sometimes they are even family members and friends. However, what they all have in common is that they are trusted to act diligently and in the best interests of those seeking counsel – but fail to do so. In these circumstances, there is a multitude of legal options that may be available in order to seek redress, whether the advisor has been fraudulent or simply negligent. 

For these options to have any potential viability, it is important to act in a timely manner. Whilst it can be tempting to hope things improve or resolve themselves, not least when faced with claims that everything will work out soon, it is important to recognise that rights of action can expire if not pursued sufficiently quickly. 

So don’t leave it to chance and explore when those deadlines will be. Not delaying can also be relevant to recovery – wait too long and this may increase the risk that assets will have been dissipated or squirrelled away. Helpfully in this regard, the English courts have a plethora of tools available to assist in identifying and preserving assets so that any judgment may be satisfied.

Nevertheless, it is crucial to identify the right target and the right route to recovery. It will be no good if the intended target is ultimately a person of straw. But were they insured? Were they regulated? Were others involved with deeper pockets? Developing a coherent strategy at the outset before pushing any buttons is fundamental to the prospects of success.

It is also important to preserve any documentation. This is often the cornerstone of proving a case. Whilst (at least in England) oral examination of witnesses is a critical feature of litigation, a judge’s first port of call is often the underlying documentary record. For that reason, when entering into investments and other deals, the best option is to try to paper everything – from the statements made and relied upon to the parties’ rights and obligations and the agreements reached. Whilst someone’s word may be their bond, this is often no substitute for something in writing.

This is an issue likely to come across more and more financial advisors’ desks as money continues to pour into sport. Understanding the nuances of the situation puts these professionals in a stronger position to support those sportsmen and women and other clients who have been victim to unscrupulous or negligent advice. 

About the author
Jon Felce, partner at Cooke, Young & Keidan LLP, has 20 years of experience acting in commercial disputes, with a particular focus on cases involving fraud and asset recovery. His firm concentrates on specialist disputes.