This is Bloomberg Law with June Brusso from Bloomberg Radio.
I think it's extremely important. I think everybody deserves a shot and deserves a chance and the opportunity to play sport. Everybody, every little kid should have the opportunity to play sport because it can really change your life.
Playing sports has certainly changed Paige Becker's life. The Yukon Husky Star has signed deals with Gatorade, StockX Cheg, and Kroc since the new NCAA rules that allow college athletes
to make money off their name, image, and likeness. There are plenty of stories about the six figure deals for star college athletes with massive social media following, but the majority of college students benefiting from the new rules are making small, one off agreements without help from expensive lawyers or agents, and that's led to exploitation and students getting ripped off by disreputable agents, questionable business deals, bad contracts,
outright scams. Joining me is Nicole Sadik, a reporter with Bloomberg Law who's investigated this new era of college sports. Tell us what happened to Savannah Shane here when she was fresh off a second place team finish at the NCAA Gymnastics Championship last year.
So Savannah Shanehare is a former gymnast at the University of Florida and she'd nearly been scammed doing what she thought was an nil deal. The long story short is, she was asked to participate in a photo shoot where she would be modeling a New York brand's clothing. It turned out the person who had reached out to her was a scammer, and they sent her a fraudulent check.
And Savannah's story is really just one example of a larger issue today with college athletics, which is that nil deals or what appeared to be nil deals, can be abusive and exploitative.
That was just an outright scam that happened to but there are other kinds of exploitation, like in contracts.
Absolutely, one of the biggest red flags that I heard from some different lawyers that I spoke to is contracts where companies are asking students to sign away their intellectual property rights. Imagine you are a student athlete and you're doing brand promotion on Instagram for you know, let's say a shoe brand. You'll post a picture of you wearing that shoe, and if you've signed away your intellectual property rights.
In some cases, that could mean that the company can continue to use that photo of you, you know, for as long as they want, in perpetuity. And so if you were to go pro after college and your market value increases, you know, the commission you'd be getting or the royalties you'd be getting from that photo wouldn't really be equitable to your market value.
So they ask them to sign away their intellectual property rights in perpetuity.
That has been sometimes the case. Of course, not every nil deal has had this. This is sort of, you know, the biggest red flag, but it certainly happens.
You got a hold of a couple of these contracts. Tell us about the one where the company would take forty percent of the revenue of merchandise sales, a rate one lawyer described as obscene.
It was this Texas merchandise company, and in the contract it said that the company would keep at least forty percent of the revenue from the merchandise sales. That's a huge commission. But what's really interesting about this contract is that it had another layer to it, which is that it locked in that same percentage for any future deals, so that essentially made the relationship between the student and the company like an athlete and an agent, which is another level.
So tell us about the one that was pitched to basketball players.
This contract was one page, very short and not really descriptive. So it didn't state who would own the student's intellectual property rights, and it didn't define, you know, what net profits would be. And so this company was going to be selling something and the students didn't know how much money they would be making.
And lawyers you spoke to said, some of these contracts look like they're just pulled off the internet.
Yes, that's right. And actually even some people I spoke to said that they would ask the students themselves to write the contract.
Okay, that's new. Can you compare the requirements to be a so called NIL agent with the requirements to be a professional football agent in the NFL.
The agents for these professional football players they have to register with the Players Association, they have to pass a legal test, and probably the most interesting to me, or for this story at least, is that they have to put a cap on their commission at three percent, and IL agents don't have that commission cap at all. It differs state to state based on state laws. But in many cases, the most that an NIL or a so called NIL agent has to do is just pay a fee to the state, pay an application.
See so we hear about the big figure contracts, you know, six figures. Are most of the students getting much smaller deals?
Yeah, I mean, these six figure deals get the most news coverage, but it is not the best representation of reality. Most students are making deals in the hundreds of dollars, maybe the thousands of dollars. But you have to think about it. There's five hundred thousand college athletes in the NCUBLEA, and we're really really just getting that top one percent in most news stories.
Is there anyone on campus that students can go to for advice when they get these offers.
One of the struggles that some athletes told me about is that the athletics departments are not allowed to provide legal advice to the students. That's actually something the NCUBA says, is that universities cannot provide legal advice to students. However, some schools have found, you know, sort of workarounds to this where their law schools, which are not under the nc double A, they offer pro bono legal clinics, so students can go to them with their questions and their
concerns about their NIL deals. But again, you know, not every university has a law school. Not every student knows to go to these pro bono clinics, so for the most part, they're on their own, or they're working with you know, their parents, or if they can afford it and it makes sense for their deals, they're working with a lawyer outside of the university.
Is there anyone on campus that students can go to for advice when they get these offers.
One of the struggles that some athletes told me about is that the athletics departments are not allowed to provide legal advice to the students. That's actually something the nc DOUBLE says. However, some schools have found, you know, sort of workarounds to this, where there are law schools which are not under the NCUBA, they offer pro bono legal clinics, so students can go to them with their questions and their concerns about their NIL deals. But you know, not
every university has a law school. Not every student knows to go to these pro bono clinics, so for the most part, they're on their own or they're working with their parents or if they can afford it and it makes sense for their deals, they're working with a lawyer outside of the university.
You talked to an athletics compliance officer at Virginia Commonwealth University. Tell us what she is concerned about.
Well, she is actually, you know, a licensed attorney, and so when she hears about or reads the contract that students has signed, she can pretty quickly pick up on red flags. And unfortunately, she told me that she's not allowed to provide legal advice to students about those contracts. And she said to me that she thinks sometimes that you know, acting in this conservative manner is you know, not helping the students to the best of her ability.
But unfortunately that's what she has to do to be in compliance with nc double A policies.
I guess you can understand that the NCUBA doesn't want to open itself for its people up to lawsuits over you know, the advice that they give.
So I spoke to Tim Buckley, who is the senior vice president of External Affairs at the nc double A, and he emphasized that the organization is a member based organization, which means that some universities act as representatives for the rest of the membership of the organization, and that these are the ones who are making the policies and making
the bylaws. And so a lawyer that I to said, these universities they have a reason for wanting to prevent their staff from providing legal advice, which is, like you said, it would open them up to liability. Imagine a student asking for advice, getting bad advice and then suing the university. So it really would open them up to a lot of potential lawsuits.
Is the NCUBA doing anything about this?
So Tim Buckley, the vice president of External Affairs at NCAA, said that there is working group right now working on updating the bylaws and the policies related to NIL and they're also pushing Congress to come up with a federal solutions. The NCAA can't govern every single entity involved in this space. They can only really govern the schools and the athletes, and so a federal law could help fill in some
of those gaps. You know, who's going to govern the agents and who's going to govern all those other bodies that are involved in these deals.
So some states prohibit students from signing anil agreements that outlast their college careers, which sounds very smart. How many states have something like that in I'm not.
Sure I have an exact number, although Texas is a big one that does that. But you know, some people in the space say the more restrictive laws, as the word says, they restrict what students are allowed to do, so they're not in favor of that. Other people say that these restrictions are important to protect them. So it's kind of this debate and it's still up in the air.
You spoke to former University of New Mexico track star Kendall Spencer, and I thought what he said was really intuitive, and he compared this to the concussion cases.
That's right. When I first started investigating this, I had a really hard time actually finding athletes who would speak
to me. And Kendall Spencer said, a lot of these students aren't going to come forward until a few years down the line, until you know, after they've graduated college, for example, they're no longer obligated to the provisions in their contract, and when they finally Sue said that we're going to start seeing lawsuits, you know, maybe five or ten years from now, and so that's really similar to the concussion than when you know, that became really prevalent only years after No.
We're talking about the problems, But how how has this changed the lives of college athletes? Is there a demonstrable change?
I mean, NIL has really been wonderful for a lot of college athletes, because you know, college athletes, they spend a crazy amount of their time, you know, in the gym or on the field or on the court. And before NIL was permitted, they weren't allowed to make any money off of the thing they spent most of their lives doing. And so now that that's opened up for them, you know, they can host training camps and make some pocket money off of that. They can endorse brands on
social media and make some money off of that. And you know, when you're in college having you know, five hundred dollars in the bank out of bad thing at all. So it's definitely been really wonderful for a lot of athletes. And the story in no ways is trying to say the opposite of that.
And also tell us about how it's you know, increased recognition of some sports and female athletes.
Absolutely, I mean some of the biggest NIL stars are female athletes. It's really put them into the spotlight. It's also put some non revenue generating sports in the spotlight. And what I mean by that is, you know sports that are are not like basketball or football, you know gymnastics or wrestling for example. You know, those sports have really been elevated because these athletes have become so popular on social media.
After working on this story for so long, do you think we're going to hear more about the NIL problems related to the students as time goes on, or that they'll catch on and you know they'll learn more by what they're hearing.
I definitely think sort of both of what you said. I think we will continue to hear, unfortunately, stories of student athletes being exploited in these NIL deals, But states and also the federal government are very in tune to these issues, so I think reforms are coming.
You know.
The only thing I'll add is that universities, although they can't provide legal advice to the student athletes, a lot of them have been working really hard to provide educational courses to the students, like financial literacy and life skills workshop, you know, to educate them on what types of contracts you should and shouldn't sign. So, although you know they're not acting as lawyers, they are educating them and I think that that is an important piece of the puzzle as well.
A great story, Nicole, and really well researched. Thanks so much for joining us. That's Bloomberg Law reporter Nicole Sonic.
This is now the third time this office has charged Weinstein with a large scale scheme to rip off investors.
Ellie Weinstein was serving a twenty four year sentence for a two hundred million dollar real estate Ponzi scheme when Donald Trump commuted his sentence in the final hours of
his presidency in January of twenty twenty one. But it didn't take Weinstein long after his release from prison to begin another scam, according to the US Attorney for New Jersey, Philip Sellinger, who says Weinstein was still on supervised release when he defrauded investors by making false promises involving humanitarian supplies destined for Ukraine, another Ponzi scheme.
Five defendants, including defendant Eleanu Weinstein, have been charged in the District of New Jersey by criminal Complaint with conspiring to defraud investors out of tens of millions of dollars and conspiracy to obstruct the justice.
Weinstein is now back in jail after bail was denied, and he's charged along with four other men, of defrauding more than one hundred and fifty investors out of thirty five million dollars by falsely promising to invest their money in COVID nineteen masks, scarce baby formula, and first aid kits bound for Ukraine. Joining me is Bloomberg Legal reporter David Voriakis so tell us about the first scheme.
Ellie Weinstein was convicted in federal court in New Jersey a decade ago for a real estate ponzi scheme that primarily preyed on Orthodox Jews in the Lakewood, New Jersey area. He pleaded guilty eventually and admitted that he stole about two hundred million dollars from his victims. While he was out on bail on that case, he was also arrested in a separate scheme that involved investing in pre IPO shares of Facebook, which turned out to be phony.
Trump commuted his sentence on the last days of his presidency, and there was a campaign for his release and a lot of the people were from the Orthodox Jewish community, which is the community that he stole from.
That's correct. He got a group of supporters, including some of his victims, a group of congressmen, Harvard Law School professor Alan Dershowitz, a couple of former US attorneys, and other supporters to campaign for his release. The White House announced on Trump's last day in office that he was
among those who were getting commutations. They put out a release citing that he was the father of seven children and a loving husband, and that he had maintained an exemplary prison history, and that he would have the strong support from his community and members of his faith. He served nearly eight years in prison when.
He was released, So now tell us about the scheme that he's accused of now when it allegedly started.
Prosecutors say that his latest crimes began not long after he got out of prison. He used several other conspirators to convince people to invest in COVID nineteen mass scarce baby formula, and first aid kits bound for Ukraine. They say that this time around, there were one hundred investors
who put up thirty five million dollars. I believe they were friends and family of Weinstein and the other conspirators in the case, and the government cracked the case, as I understand it, because a couple of the conspirators who were not charged with crimes secretly recorded him, and he made a number of admissions on those tapes, including he said I finagled and ponzied and lied to people to cover and he told one conspirator that he hit his
true identity behind the alias of Mike Koenig because he said, no one would ever give you a penny if they knew who I was, because I have a bad reputation.
So the US attorney said that these were brazen and sophisticated crimes that involved multiple conspirators and drew right from Weinstein's playbook of fraud. So was it the same kind of things he was doing as he was convicted of and a Ponzi scheme too.
That's what they've alleged that he used an alias and he hid behind other people because he didn't want the world to know that he was committing these kinds of crimes. Again, he convinced people to put up money, and then he used the money from later investors to pay earlier investors.
So allegedly repeating the sins of the past. And what about the money he was supposed to pay in restitution.
He had a restitution order totaling about two hundred and thirty million dollars and he had only paid a little more than a million dollars of that. He also has a series of civil judgments that are not covered by his criminal restitution order.
You mentioned that there were secret recordings in which Weinstein made admissions. Does that mean that the FBI has flipped one or more people.
There's clearly people around Weinstein who are cooperating with the FBI in this investigation.
One of the people you talked to said that Weinstein's conduct is unique.
Well, the special Agent in charge of the New Jersey office said, it's a very rare day that we announced we've arrested a man who's already been arrested, convicted, sentenced to prison, and then received a presidential commutation.
I take it it's the commutation part that makes this different, because people come in and out of prison unfortunately all the time.
Right because presumably when his sentence was commuted, this was on the promise that he would never do this kind of criminal activity again.
And according to these new allegations. He started this new scheme shortly after he was released. So prosecutors have charged him and the four others with wire fraud, conspiracy, and conspiracy to obstruct justice, and the Securities and Exchange Commission has also filed a lawsuit.
Right they sued essentially the same cast of characters, saying that he committed securities fraud. Presumably that civil regulatory action would take a back seat to the criminal prosecution while it's ongoing.
And tell us how the SEC's enforcement director knows Weinstein.
Gavier Greywall worked on the first Einstein prosecution. He was one of three prosecutors, and so he knows Weinstein quite well. He knows the facts of his criminal history well.
And tell us what happened as far as bail.
Weinstein made an initial appearance in federal court in Trenton last week and he was denied bail. He's being held without bail until his lawyers can make a bail package, and then it's up to a judge to determine whether the conditions of bail are adequate to ensure his future appearance.
Did Weinstein go to trial for the first Ponzi scheme?
He pleaded guilty. There was extensive pre trial motions, but he ended up not going before a jury.
And does this look like it might be a similar situation with the amount of evidence they have already against him, secretly recorded tapes and perhaps a witness who flipped.
Well, like any criminal defendant, he has the right to go to trial and confront his accusers. That's his constitutional right. He may decide that he's going to attack the evidence and attack the underlying recordings. We'll just have to see how it plays out and.
How much time is Weinstein facing here.
Weinstein faces twenty years in prison on the most serious count, but prosecutors have said that the investigation is ongoing, so there could be additional charges coming. He's been arrested on an FBI complaint and they may go to a grand jury and try to get an indictment.
I know you'll continue to follow this case. Thanks so much for being on the show, David. That's Bloomberg Legal reporter David Voriakis, and that's it for this edition of The Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law podcast. You can find them on Apple Podcasts, Spotify, and at www dot bloomberg dot com, slash podcast Slash Law, and remember to tune into The Bloomberg Law Show every weeknight at ten
pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg