SEC Scrutinizes $2 Million Wire Transfer Between WFAN's Craig Carton, Hedge Fund and Barclays Center

 Randy Belice/NBAE via Getty Images
Barclays Center in Brooklyn, N.Y.

Carton allegedly deceived arena officials into wiring him a stolen million from the hedge fund as part of an elaborate scheme

Officials with Brooklyn Sports and Entertainment are cooperating with federal authorities in their Ponzi scheme investigation of WFAN sports broadcaster Craig Carton after learning that building officials unknowingly assisted Carton in the theft of $2 million from a leading hedge fund, Billboard has learned.

Carton was arrested Wednesday for participating in a Ponzi scheme with notorious entertainment executive Joe Meli, whose $98 million operation has entangled some of the biggest players in the secondary ticketing space, including DTI. Officials with the Securities and Exchange Commission say Carton defrauded $5.6 million from investors, promising to spend the money to buy and re-sell concert tickets, but instead used the funds to repay gambling debts and loans to casinos.

According to the SEC complaint, Carton used his connections with a New York City "Venue Company” to trick hedge fund Brigade Capital Management into handing over $2 million for the purchase of Barbra Streisand and Metallica tickets.

Billboard has learned that the venue company in question is Brooklyn Sports and Entertainment, which operates Barclays Center in Brooklyn and Nassau Coliseum on Long Island. According to the SEC complaint, Carton instructed the hedge fund to wire $2 million to an account controlled by BSE, and then told arena officials the wire transfer was accidentally sent to the wrong account and convinced them to wire the money to a separate ticket brokerage he controlled.

"The $2 million sent from the Hedge Fund to the Venue Company, and then diverted to Tier One Tickets, was not used to purchase tickets to the two agreed-upon Barbra Streisand and Metallica concerts,” SEC attorney Caitlyn M Campbell wrote in a complaint against the long-time New York broadcaster. "In actuality, Carton misappropriated the Hedge Fund’s $2 million: $950,000 was wired to his personal account.” Carton allegedy used those funds to repay previous investors and a number of casinos, while another $1 million was wired to an individual the SEC is referring to as "Associate 1.” The identity of Associate 1 is unknown at this time.

Officials with the Barclays Center tell Billboard they're "working with authorities and can’t comment any further at this time."

Lawyer Robert C. Gottlieb is defending Carton, and released a statement saying, "The government’s allegations against Craig Carton demonstrate a gross misunderstanding of what happened. Craig is a victim who was deceived, manipulated and used by individuals seeking to gather assets for their own fraudulent schemes.” Gottlieb's statement adds that Carton "is a good man, devoted to his family with a long-time personal commitment to giving back to his community. Through TicTocStop, a foundation focused on funding Tourette Syndrome research and programs for children who have the syndrome, Craig has sponsored a $340,000 study by the University of Tennessee Dental School to develop a revolutionary new treatment for patients with mild to moderate Tourette Syndrome."

Carton has a long relationship with Brooklyn Sports and Entertainment. He and broadcaster partner Boomer Esiason have called play-by-play on Islanders games and have a food stand -- Boomer & Carton Kitchen -- named after them at Barclays Center, selling items like the Boom Doggy Dog, the Batchagaloop Burger and Carton’s Kickin’ Chicken. Authorities believe that Carton used his connections at the facility to lure in the hedge fund and then used fake documents and forged signatures of Barclays Center officials to make the deal look real. While Carton is also alleged to have participated in other schemes to steal from the hedge fund and private investors with Meli, authorities say Carton orchestrated the Barclays scandal on his own.

In a lengthy 26-page SEC complaint (Carton was also indicted on similar charges by the U.S. Attorney’s New York Southern District office), attorneys describe how Carton allegedly used a mix of deceit, forgeries and sheer luck to con Brigade Capital Management for a total of $4.6 million. In March, Brigade won firm of the year at the Absolute Return Awards, which honors the investment world’s best-performing hedge funds. Carton allegedly first approached the fund in September and over a period of months convinced fund officials to finance a revolving loan agreement to buy up tickets for in-demand concerts by Katy Perry, Justin Bieber, Roger Waters, Metallica and Streisand.

After negotiating several allegedly-fraudulent agreements, in December Carton convinced the Hedge Fund to invest in a separate deal for the "purchase and resale of $2 million worth of tickets to two specific, upcoming performances by Barbra Streisand and Metallica” at the Barclays Center and Nassau Coliseum. Streisand performed at Barclays Center on May 4 and Nassau Coliseum on May 6, her only two concerts so far in 2016. Metallica played Nassau on May 17.

According to the SEC lawsuit, Carton "deceived the Hedge Fund into believing that, as of Dec. 16, 2016, Ticket Jones had an agreement with the Venue Company for the purchase and sale of $2 million worth of tickets to the two agreed-upon Barbra Streisand and Metallica concerts. In reality, Ticket Jones/Carton had no such agreement with the Venue Company." To boost his claim, he allegedly created fake documents and purchase orders with phony signatures from BSE management.

When Brigade officials asked for a phone meeting with BSE officials, "Carton falsely represented, in three separate emails on the morning of Dec. 19, 2016, that this was not possible because 'the [Venue Company’s] execs are in Orlando'; 'they are in meetings most of the day apparently'; and 'they are in meetings till 4:30 and then flying home,'” according the SEC suit. Eventually, hedge fund officials relented and wired the $2 million to the Barclays Center.

On that same day, Carton then allegedly called BSE and "told him to expect a $2 million wire," the complaint reads. "Carton falsely claimed the wire had been sent 'in error' and that Carton’s investor meant to send the money to another bank account. Carton stated that the money should be 'refunded' to a bank account in the name of Tier One Tickets." Carton’s ploy allegedly worked and on Dec. 21, BSE, "relying on Carton’s confirmation, wired the Hedge Fund’s full $2 million to Tier One Tickets, accompanied by the following memo by the Venue Company: 'Return of Wire Sent in Error.'"

Authorities say Carton later attempted to buy up some tickets to cover the hedge fund investment, "using his personal credit card to purchase a fraction of the $2 million worth of tickets to the two concerts the Hedge Fund had agreed to invest in." That included approximately $16,000 worth of Metallica tickets and approximately $345,000 worth of Barbra Streisand tickets, and a few months later, $500,000 worth of tickets to a different Barbra Streisand concert "on a different date and at a different venue from the one the Hedge Fund had agreed to invest in before wiring its $2 million investment to the Venue Company in December 2016. Carton was ultimately unable to resell a significant portion of the Barbra Streisand tickets he purchased."

Carton’s co-defendant Joe Meli was arrested in January and charged for his participation in a much larger Ponzi scheme.