The SEC has filed charges against three Arizonian individuals, alleging they defrauded investors by falsifying revenue documents for a US$284 million municipal bond issuance that funded a sports complex in Mesa, Arizona. The scheme relied on forged documents inflating revenue projections, ultimately leading to the bond default in 2022 and investors only recovering US$2.5 million.
The SEC has charged Randall J. Miller, Chad J. Miller, and Jeffrey De Laveaga with fraud in connection with two municipal bond offerings totaling approximately US$284 million, intended to finance the construction of a massive sports venue in Mesa, Arizona.
According to the SEC’s complaint filed in the U.S. District Court for the Southern District of New York, the defendants allegedly fabricated and altered financial projections and supporting documents, including falsified letters of intent and fake “pre-contracts” from sports clubs and leagues purportedly agreeing to use the facility.
Legacy Cares, a nonprofit founded by Randall Miller specifically for issuing the bonds, utilised the Arizona Industrial Development Authority as a conduit issuer in August 2020 and June 2021. Investors were misled to believe that the multi-sports park and entertainment complex operated by Legacy Sports USA, LLC would generate revenue far in excess over bond repayment coverage. The gym complex significantly underperformed, generating just US$28 million compared to the projected US$96 million in its first year.
The bonds defaulted in October 2022, causing substantial losses for investors who recouped less than US$2.5 million in liquidation after Legacy Cares filed for bankruptcy in May 2023. The sports complex is now operated by a new entity.
The SEC alleges violations of anti fraud provisions under Section 10(b) of the Securities Exchange Act and Rule 10b-5, and Section 17(a) of the Securities Act. The commission seeks permanent injunctions against future securities violations, disgorgement with prejudgment interest, and civil penalties.
Municipal bond disclosure obligations, critical for investor protection, require issuers and underwriters to present accurate and complete financial information. SEC Rule 15c2-12 mandates that an official statement deemed “final” by the issuer must be reviewed and delivered to potential investors, ensuring transparency and reducing the risk of fraud. The defendants’ actions, as alleged by the SEC, breached these critical standards designed to uphold market integrity.
Parallel criminal charges have also been filed by the U.S. Attorney’s Office for the Southern District of New York. The SEC investigation continues as authorities seek to hold accountable those involved in undermining the US$4 trillion municipal bond market.
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