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The Securities and Exchange Commission alleged former Harvard football player Nicholas A. Palazzo ’03 defrauded investors in his various sports-related companies — including at least two of his former teammates on the Crimson, according to a lawsuit filed in federal court on Friday.

Palazzo allegedly used his connections with former teammates to raise money he spent primarily on paying off his debts and other personal expenses like a trip to Disneyland, private school tuition for his kids, and rent for a multi-million-dollar home.

Another of Palazzo’s alleged victims was an 89-year-old Navy veteran who sent Palazzo at least $500,000 from 2020 to 2023, according to the lawsuit.

Palazzo did not respond to a request for comment on Monday.

In the complaint, which was filed in the U.S. District Court for the Northern District of California, the SEC outlined two main securities frauds allegedly perpetrated by Palazzo between October 2019 and December 2023.

The first involved a company called STACK — which the SEC described as a “youth sports media company” that was supposed “to produce media and content for young athletes” — that Palazzo founded in 2005.

According to the complaint, by 2017 the company had “more than $18.6 million in outstanding liabilities.” Palazzo subsequently STACK assets to software company SPay for $9.5 million.

Despite the sale, Palazzo allegedly failed to fully repay STACK’s investors and creditors — a fact he concealed from SPay despite being SPay’s Chief Digital Officer at the time.

STACK’s largest customer — a digital marketing company referred to in the complaint as “Entity A” — went into receivership in 2019 and the receiver began demanding money from STACK — a problem Palazzo admitted to trying to solve by sending $250,000 to the receiver.

At the time, SPay still believed that Entity A owed STACK money, according to the complaint. In November of 2019, Entity A’s receiver demanded $4 million from SPay.

Palazzo was terminated from SPay in April 2020.

The lawsuit alleges that in 2019 Palazzo formed 4TA Sports as a company he could use to buy back STACK from SPay.

According to the SEC, Palazzo then targeted two former teammates and convinced them to each invest $250,000. Palazzo allegedly used a funding agreement signed by a codefendant in a separate civil lawsuit to misleadingly convince them that he had raised $5 million for the company.

While Palazzo and his codefendant were raising money to help deal with a civil suit, the SEC’s complaint alleged the sum was closer to $1 million not $5 million and was not intended for repurchasing STACK.

Palazzo also sold both former teammates “secured promissory notes,” which were supposed to be guarantees of their money being paid back with interest, according to the complaint.

The SEC claims that Palazzo used 90 percent of the money he raised — which included $400,000 he received from another person — on expenses related to the various lawsuits he was facing, debts, vacations, and private school tuition.

This included allegedly sending $250,000 to Entity A’s receiver.

In the second scheme, the SEC claims Palazzo fraudulently solicited investor money for the development of Play Caller Sports Gaming LLC — a sports-betting platform incorporated in 2020 by Palazzo.

In November 2020, Palazzo told a group of Dallas-area investors that their investment would be used to pay software engineers and bring Play Caller to market by January 2021, in time for the NFL playoffs, according to the SEC’s lawsuit.

Instead, the SEC found that the Palazzo quickly put the money towards personal use — spending roughly $19,000 that month on personal legal fees related to a civil lawsuit from 2019. He later spent $235,000 of the $500,000 total investment for settlement.

Palazzo attempted to hide his fraudulent statements to investors by charging exorbitant “consulting fees” to corporate entities controlled by himself.

As chairman and CEO of each company, Palazzo was the sole signatory for consulting agreements that amounted to annual charges of $480,000.

From 2020 to 2023, Palazzo funneled approximately $1 million in investor funds to himself through these agreements, spending less than $350,000 on developing Play Caller.

In addition to consulting fees, Palazzo spent money directly from Play Caller and NP Ventures’ bank accounts on personal expenses, according to the complaint.

Palazzo testified that he reallocated these expenses each month, either as expense reimbursement, consulting fees, or loans to himself.

By January 2024, Palazzo had four outstanding loans to himself at a total of $709,000. He has acknowledged that these loans were never disclosed to investors, according to the complaint.

The lawsuit “seeks permanent injunctions, civil penalties, and disgorgement with prejudgment interest against all Defendants and also seeks a conduct-based injunction and officer and director bar against Palazzo,” according to a Friday SEC press release.

—Staff writer Jo B. Lemann can be reached at jo.lemann@thecrimson.com. Follow her on X @Jo_Lemann.

—Staff writer Tyler J.H. Ory can be reached at tyler.ory@thecrimson.com. Follow him on X @tyler_ory.