Former SFX Chairman and CEO Robert Sillerman is under investigation by the federal Securities and Exchange Commission for allegedly misappropriating $6.6 million from his company Function(x), which led to the resignation of auditing firm BDO.
The company disclosed the investigation in a one-line SEC filing Friday, writing “Following the disclosure of the information concerning the resignation of BDO, the Company has been contacted by attorneys from the Securities and Exchange Commission (“SEC”), who indicated that the SEC intended to investigate issues related to this matter.”
Last month, an internal audit of Function(x) turned up an unapproved transfer of $6.1 million of company funds and an undisclosed cash withdrawal of $500,000. Company officials notified the SEC of the alleged wrongdoing, which also included suspicious stock offerings to new investors and an overpayment to Sillerman himself for loans he had personally made to Function(x).
Function(x) is a media holding company for clickbait titles like women’s news site wetpaint.com and millennial sports site rantsports.com. The publicly- traded company had been on the NASDAQ until June 21, when market officials notified the company it was being delisted because of its low share price.
According to the report, Sillerman allegedly broke the law with several illegal transactions, including:
- A $6.1 million transfer from Function(x)’s accounts to Sillerman’s personal account “in excess of a threshold that would have required two approvals prior to execution.” Sillerman allegedly got around the approvals by linking his personal account to the company account within the same bank, masking the transaction.
- A March 2017 cash withdrawal executed for $500,000 by Silllerman “with no explanation” and “no supporting documentation” to the CFO. Due to the withdrawal’s suspicious circumstances, auditors recommended Sillerman “be investigated further (by in-house counsel) to determine the appropriateness of the transaction.”
Sillerman is also believed to be under investigation by a litigation committee at his former company SFX, which filed for bankruptcy in early 2016 amid accusations of fraud and allegations that Sillerman lied about efforts to take the company private in order to boost its stock price. SFX emerged from bankruptcy late last year, rebranded as LiveStyle and controlled by its senior creditors and is preparing to pursue litigation against its former CEO.
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