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SEC Charges Three Arizona Individuals With Fraudulent Municipal Bond Offering
04/08/2025On April 1, 2025, the Securities and Exchange Commission filed a complaint three individuals for allegedly defrauding investors in a $284 million municipal bond offering intended to finance a sports complex and family entertainment center in Mesa, Arizona (“Facility”). SEC v. Randall J. Miller, et al., No. 1:25-cv-01234 (S.D.N.Y. filed Apr. 1, 2025).
The SEC seeks permanent injunctions, disgorgement, civil penalties, and conduct-based injunctions against defendants. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York announced criminal charges for similar conduct.
The SEC complaint alleges that Legacy Cares, Inc., a nonprofit company founded by one of defendants, issued municipal bonds in 2020 and 2021 to finance the Facility. The Facility was to be operated by Legacy Sports USA, LLC, a company founded by one of defendants and managed by the other two defendants. It further alleges that defendants falsified financial projections for revenue which were provided to investors in bond offerings.
Further, the SEC alleges that defendants allegedly fabricated or altered dozens of letters of intent and contracts with sports clubs, leagues, and other entities to use the sports complex, and based their revenue projections on these false documents. In particular, the complaint alleges that defendants provided the false documents and projections to the underwriter, an outside consultant, and potential investors, and made false and misleading statements in an investor webinar. The sports complex opened in 2022 with far fewer events and much lower attendance than expected, and the bonds defaulted in 2022. Legacy Cares filed for bankruptcy in 2023 and the sports complex was sold to a new entity.
Investors in municipal bonds should be aware of the risks and uncertainties involved in municipal bond offerings and should not rely solely on the representations of the issuer or the underwriter. Moreover, issuers and underwriters of municipal bonds should ensure that they comply with the anti-fraud provisions of the federal securities laws and ensure they disclose all material facts and risks to investors. The SEC has stated that it will hold accountable individuals who defraud municipal bond investors and that it will maintain the integrity of the approximately $4 trillion municipal bond market.
