Robert F.X. Sillerman Settles Securities Fraud Charges

One-time billionaire and founder of SFX Entertainment (now LiveStyle), Robert F.X. Sillerman, has agreed to never again serve as an officer or director of a public company. Also, he agreed to pay a $179,000 fine to settle securities-fraud charges.

Previously, Robert F.X. Sillerman, served as chancellor of Southampton College. He was also a one-time holder of an interest in Elvis Presley’s Graceland. Recently, a legal complaint filed in Manhattan federal court accused Sullerman of defrauding investors in Function(x) Inc.

In agreeing to settle the SEC charges, Sillerman did not admit or deny the allegations against him. The court still must approve the settlement. Separately, Sillerman filed for Chapter 11 bankruptcy protection from his creditors.

He founded and ran Function(x) until April 30, 2018. The company was an online publisher and entertainment company in Manhattan. Function(x) shares traded on the Nasdaq and then the Over-The-Counter stock markets before the company closed in June 2018 after incurring losses, securities filings show.

Robert F.X. Sillerman and the Function(x) fraud

“Between March and May 2017…Sillerman engaged in a scheme whereby he fraudulently raised money from investors and diverted offering proceeds for his own use,” the complaint states.

Robert F.X. Sillerman allegedly transferred $500,000 from Function(x) to his personal bank account in March. He claimed it was for reimbursement of payments he had made on the company’s behalf. The money allegedly came from $4.8 million that had been raised in a public stock offering a month earlier.

Function(x) Inc. logo

Sillerman then attempted to conceal Function(x)’s financial problems by transferring $250,000 from his personal bank account to the company. He then transferred the money back after a quarterly reporting period had passed.

Financial problems

In late April and early May 2017, Function(x) continued to incur operating losses and was in a precarious financial state. If Function(x) failed, Sillerman would not be able to recoup his loans to the company.

So he led a private stock offering that was supposed to fund Function(x)’s operations, but, allegedly, was used to repay his loans according to the complaint. Also, he created the false appearance that the offering raised $10 million when in fact it only raised about $5 million.

To entice investors, Robert F.X. Sillerman allegedly claimed that two unnamed celebrities had agreed to invest $1 million each in Function(x). He falsified their signatures on documents, according to the complaint.

Withdrawals and audits

Later, Sillerman allegedly withdrew $1.3 million from Function(x)’s bank account without authorization. At least $550,000 of that money exceeded what the company owed him, the complaint states.

Function(x)’s auditor questioned the withdrawal. Upon this, a law firm began investigating. The auditor resigned in June 2017, writing a letter detailing Sillerman’s alleged illegal actions. These became public knowledge six days later.

SFX Entertainment

Before starting Function(x), Sillerman founded and ran SFX Entertainment Inc. SFX Entertainment was a public company that operated the Beatport online music store and produced electronic music events, including Spring Awakening, Tomorrowland, and the Electric Zoo festival.

Electric Zoo Festival

In 2013, SFX had a valuation at $1 billion. However, three years later, the company filed for bankruptcy. The Manhattan company exited bankruptcy with a new name, LiveStyle, and without Sillerman.

Other business by Robert F.X. Sillerman

Sillerman sold an earlier incarnation of SFX to Clear Channel Communications in 2000. It eventually became part of concert promoter Live Nation.

Robert F.X. Sillerman was also a major shareholder of CKX Inc. This company owned “American Idol” and the licensing rights to Elvis Presley and his Graceland estate. Later, the private equity firm Apollo Global Management acquired CKX in 2011.

In addition to concerts, Robert F.X. Sillerman was a significant player on Broadway. He provided financial support for Mel Brooks’ musical comedies “The Producers” and “Young Frankenstein”. Sillerman also served as chancellor of Southampton College, a unit of Long Island University.

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