A bankruptcy trustee has accused Shilo Sanders of making unauthorized transfers of about $250,000.
Sanders filed for bankruptcy in 2023 to address an $11.89 million judgment from a lawsuit.
The trustee claims Sanders violated the automatic stay by controlling funds that should belong to the bankruptcy estate.
The trustee in the bankruptcy case of Shilo Sanders has filed a complaint against the former Colorado football star, claiming Sanders violated bankruptcy law by making unauthorized transfers of approximately $250,000.
Sanders, son of Colorado coach Deion Sanders, filed for Chapter 7 bankruptcy in October 2023 in an effort to free himself of more than $11 million in debt.
The trustee in the case, David Wadsworth, filed the complaint against Shilo Sanders on Wednesday, Oct. 22 and is seeking to recover that money and more, which included college income for Sanders from his name, image and likeness (NIL).
The trustee asserted that Sanders violated the automatic stay in the case, which is supposed to prevent him from taking possession of certain assets that become property of the bankruptcy estate after filing a petition for bankruptcy. Before filing for bankruptcy, Sanders entered into NIL contracts through his company called Big 21, LLC.
“The Trustee also asserts a claim for violation of the automatic stay based upon the Debtor’s (Sanders’) exercise of control over Defendant Big 21 including its bank account,” says the complaint, obtained by USA TODAY Sports. “After the Petition Date, only the Trustee as the sole member of Defendant Big 21 had the authority to authorize transfers out of Defendant Big 21’s bank account. Nevertheless… the Trustee did not authorize transfers that totaled approximately $250,000.00 out of Defendant Big 21’s bank account after the Petition Date for the benefit of the Debtor.”
An attorney for Sanders didn’t return a message seeking comment. Sanders was waived by the Tampa Bay Buccaneers before the NFL season and was pursuing other career options after that.
What is going on in Shilo Sanders’ bankruptcy case?
Sanders, 25, did not file for bankruptcy because of unpaid loans or overspending with credit cards. He instead was hit with a default judgement of $11.89 million after he was sued by the former security guard at his previous school in Dallas. The lawsuit in Texas civil court alleged Sanders attacked the security guard, John Darjean, at school in 2015, when Sanders was 15 years old. Darjean alleged he suffered permanent and severe injury from Sanders’ elbow and fist after he tried to confiscate his phone at school.
Sanders has claimed it was in self-defense. But he didn’t show up for the trial in 2022, leading to the default judgment owed to Darjean.
Sanders then filed for bankruptcy after Darjean moved to collect on that judgment. But one of the prices of trying to get out of debt in bankruptcy court is that a trustee is put in charge of rounding up the debtor’s non-exempt assets to be sold and divided among the creditors. This generally includes assets a debtor earned before filing for bankruptcy, not after.
“Upon the Petition Date (in October 2023), the Debtor’s right to manage Defendant Big 21 and withdraw funds from the Big 21 Bank Account became property of the bankruptcy estate subject to the exclusive control of the Trustee,” the complaint states.
By making unauthorized transfers from this account, Sanders “willfully violated the automatic stay” under the bankruptcy code, the complaint alleges.
What else did the complaint state?
The complaint lists Shilo Sanders and two of his companies as defendants: Big 21 LLC and Headache Gang LLC. The complaint says that Sanders entered into an NIL contract through Headache Gang after he filed for bankruptcy.
The complaint states that Headache Gang received a payment for $202,500 in late December 2023, after Sanders filed for bankruptcy.
“To the extent the Headache Gang Revenue is based on the Debtor’s prepetition NIL contracts, the Headache Gang Revenue is property of the bankruptcy estate,” the complaint states.
The trustee is seeking “turnover all revenue and proceeds of any prepetition NIL contracts entered into by the Debtor and the other Defendants whether that revenue was entered into prior to or after the Petition Date.”
Shilo Sanders turned over $210,000 to the bankruptcy estate
The complaint says the trustee authorized Shilo Sanders to write a check payable to the Trustee for $210,171 and agreed that $65,000 was a reasonable salary for Sanders in tax year 2023.
The issue in the complaint is that the trustee believes the bankruptcy estate is entitled to much more, including at least a portion of his 2023 tax refund of $4,902.
“The Trustee has demanded an accounting from the Debtor,” says the complaint filed by attorney Peter Cal.
Besides the complaint from the trustee, Sanders also is fighting two complaints filed against him by Darjean, the creditor. Darjean is fighting Sanders’ attempts to get out of the debt owed to him, arguing by law the debt is not dischargeable because it came from a willful and malicious injury. Those complaints are pending.
If the court favors Sanders and rules that the Texas judgment against him is dischargeable, Darjean would only collect pennies on the dollar of what he is owed through what is rounded up by the trustee in the bankruptcy estate.
Follow reporter Brent Schrotenboer @Schrotenboer. Email: bschrotenb@usatoday.com
