In radio circles, Robert F.X. Sillerman may still be best known as the man who built SFX Broadcasting, ultimately selling the company to Capstar in 1998 for $2.1 billion. He then gobbled up concert promoters and sold that enterprise to Clear Channel in 2000 for $4.4 billion. Now he’s making news of a different kind.
Sillerman has agreed to pay a $179,000 fine after the U.S. Securities and Exchange Commission charged the businessman with fraud for illegally diverting company funds to personal accounts, while misrepresenting celebrity endorsements and the financial health of his online publishing and entertainment business Function(x) to attract new investors.
In addition, he has been permanently barred from holding a position of director or officer for any public company.
According to the SEC's complaint, as reported by Billboard, Function(x) endured significant losses during first quarter 2017 and completed a public securities offering that brought in $4.8 million from investors in order to raise capital and fund operations. The complaint alleges that Sillerman then fraudulently diverted $500,000 of those offering proceeds to repay loans he had made to the company as CEO.
He is also accused of misleading individuals to invest in Function(x) by falsely claiming two unnamed celebrities had agreed to invest in the company. In order to con investors into believing the celebrities were involved with Function(x), Sillerman is said to have created phony subscription documents with forged signatures from the two celebrities.
The SEC complaint says that Function(x) publicly announced the offering had raised $10 million, to be used for working capital and corporate expansion. In fact, the company raised only half of that while Sillerman diverted all proceeds to his personal bank accounts to repay loans.
Sillerman agreed to settle the SEC's charges without admitting or denying the allegations in the complaint, and he will pay the civil penalty pursuant to the Chapter 11 plan approved in his personal bankruptcy case. He filed for Chapter 11 bankruptcy in February 2018 after Chicago-based EDM promoter React Presents and its ticketing platform, ClubTix, won a judgement against the businessman over a $10 million unpaid promissory note he guaranteed for the purchase of React Presents, Billboard reports.