Bloody Elbow first reported three weeks ago on a federal lawsuit alleging internal strife within the World Series of Fighting (WSOF), financial problems, and possible violations of the Nevada Athletic Commission's (NAC) code for MMA promoters. It has since obtained copies of three additional lawsuits, two WSOF operating agreements, two disputed contracts, demand letters and e-mails, all of which create a substantially more complete story of the last three years in the life of the WSOF, its financial standing, ownership structure, and the ongoing dispute between the company and former executives.
The key owners of the world's top two MMA promotions are well known. As of the middle of this year, Lorenzo and Frank Fertitta, through their LLC and family trusts, owned 81% of the UFC (Zuffa) and Viacom owned 97% of Bellator. Yet we know very little about the black box many call the world's #3 MMA promotion, the World Series of Fighting; that is, until today.
The names most frequently associated with the WSOF, president and former K-1 kickboxer Ray Sefo and SVP/matchmaker Ali Abdelaziz, have been some of its least influential players from an ownership perspective. In corporate operating agreements from 2012 and earlier this year, neither was listed as a board member while Sefo's ownership percentage has fallen from 8% down to 3.42% this past May. Abdelaziz does not appear to own any of the company in either of the operating agreements.
WSOF's former "consultant," Shawn Lampman, made the news rounds in January when he was sentenced on a federal tax charge and subsequently disassociated from the company. Many media insiders believe Lampman was much more than a consultant and court records and internal corporate documents obtained by Bloody Elbow support this. One lawsuit, filed in October 2015, called Lampman the "CEO of WSOF" as late as September 2014. In Lampman's sentencing memorandum that same month, WSOF founding member, Sig Rogich, submitted a letter of recommendation referring to Lampman as "our President for the World Series of Fighting."
The CFO of WSOF at the time, Vincent Hesser, also submitted a letter referring to Lampman as "an integral part of our company" and "a uniquely qualified person, and frankly without him here every day, our company will likely fail."
Bloody Elbow can now confirm that according to the two operating agreements, ACAK Revocable Trust was a founding member of WSOF, had a seat on the board, and, from at least Nov. 1, 2012 until May 6 of this year, was the largest single owner of the company. The trustee of ACAK is Lampman's mother, Sally Story. Bloody Elbow has also discovered a purported promissory note where Lampman appears to sign on behalf of ACAK. While WSOF disputes the validity of this agreement, it appears to show Lampman's relatively unique signature below both "ACAK Revocable Trust" and "Shawn Lampman."
For many readers, most names in this story will be new. While not popular, these are WSOF's "Fertittas" or "Viacoms" if you will; the people making and approving decisions at the highest level of the organization.
As the story goes, Sefo did an interview one Friday with TapouT radio when the conversation turned to the possibility of running a fight promotion, something he had previously mentioned in passing to his wealthy friend, Sig Rogich. Without hearing the interview, Rogich happened to call Sefo the very next day to discuss starting their own "MMA fighting league." The conversation eventually gave birth to the WSOF.
MMAWC, the company doing business as WSOF, was formed on June 3, 2011. To the world, the face of the company would become Ray Sefo. But in June 2011, Sefo was in the tail end of bankruptcy proceedings. He hadn't done anything shady or terribly reckless. His mistake was a familiar one during the housing bubble, buying a house in 2006 that would end up $300,000 underwater five years later. It also didn't help that K-1 might've been stiffing him for $700,000.
Many believe Rogich was the money behind WSOF, but this seems to be contradicted by their own internal documents. We don't have the first operating agreement of MMAWC but can pick up the story in the fall of 2012 as WSOF was heading into its inaugural show set for Nov. 3.
According to a complaint filed by WSOF Asia against MMAWC and others, "MMAWC was in dire need of cash for operations and on the cusp of shutting down." Lampman then allegedly solicited a group of investors including Shawn Wright and Vincent Hesser in an effort to secure $700,000. According to a court document filed by Wright and his associated companies, "Shawn Lampman, through a trust named the ACAK Trust borrowed $700,000 from Tropyx and pledged said funds to MMAWC." Wright was the president of Tropyx and is claimed to have been its majority shareholder in one court filing.
"In further consideration for facilitating and making the loan," Wright and Hesser allegedly negotiated additional compensation, with Hesser receiving "...worldwide licensing rights for MMAWC and its d.b.a. and trademark ‘WSOF'" and another Wright entity, Zion Wood O.B. Wan Trust, receiving "a non-dilutable equity ownership interest in MMAWC of seven and one-half percent."
A copy of the purported licensing agreement can be seen below. The document describes early money problems at WSOF in the lead up to its first show: "MMA[WC] has required investment capital to continue as a going concern, and Consultant has been instrumental in negotiating substantial investments into MMA[WC] to continue as a viable company..."
MMAWC disputes this agreement in court filings, stating, "No known WSOF records support the assertion that this document was created or signed on or around the date on the document. No known WSOF records exist that this agreement was presented to, reviewed by, or approved by the Board of Managers at any time. The person purporting to sign the document, Shawn Lampman, did not sign it in any authorized or official capacity; he is presently in federal prison for failing to file federal tax returns."
What we can be sure of is that on Nov. 1, 2012, two days before WSOF's inaugural event, MMAWC members executed a Third Amended and Restated Operating Agreement to bring in Wright's Zion trust as a member.
Instead of shareholders, LLC's have members. Instead of stock, members own units. In the documents obtained by Bloody Elbow, MMAWC's units sum to 100 so the number of units can be thought of as a member's ownership percentage. For any members that are trusts or LLC's, we'll refer to them by the names of their signatory representatives.
According to the Third Amended and Restated Operating Agreement, on Nov. 1, 2012, the largest owner of MMAWC was Lampman's mother, Sally Story. His former girlfriend, Aymet Roman, owned 2%.
Bruce Bendell, the CEO of Major Automotive Companies, would seem to be the money man, at least to start. In fact, under the terms of the operating agreement, Bendell was contractually required to contribute an additional $1.2 million: $600,000 within five business days after the distribution of net revenues following each of the company's first two events. But by May 2015, according to an amended operating agreement, Bendell's total capital contributions had only increased roughly $400,000 to $1,138,927 and he had been substantially overtaken by Bruce Deifik as the largest capital contributor.
Bendell and Wright were Capital B members, meaning they would receive top priority in distributions of Net Cash from Operations. Capital A members had secondary priority, and once Unreturned Capital Contributions were distributed, all members would be treated proportionally to their ownership percentage. Something that's still unclear is why Zion's supposed loan is listed as an Initial Contribution.
MMAWC's board was to have between three and seven members. In late 2012, it had five board members comprised of Sig Rogich, Shawn Lampman's mother, Bruce Bendell, Haskel Iny, and Bruce Deifik. This was the effective power team of the World Series of Fighting.
The following year, Hesser was made Chief Financial Officer of the company and Wright was appointed as Treasurer. Both served on WSOF's Finance Committee.
According to court records, by September 2014, "...WSOF was experiencing financial difficulties. It was unable to meet its rental obligations in its current location. CEO of WSOF, Shawn Lampman, then approached [Michael Hesser (Vincent's father)] about subletting office space." According to Michael Hesser, he accommodated and entered into a five-year sublease with WSOF at 3275 South Jones Blvd. His "aid was timely, because on September 13, 2014 an employee of WSOF sent an email to Bruce Deifik and fellow employees stating that WSOF would be locked out of its offices on September 14, 2014 for non-payment of rent. There were no offers of assistance from any board members or employees of WSOF for office space relocation."
According to Wright, by November 2014, "WSOF was in need of short term funds for WSOF 15 in Tampa, Florida... The members/investors in WSOF had agreed to make capital contributions sufficient to fund the Fight, which had to air on NBC Sports that night in order to comply with the NBC schedule. However, several members failed to make their contributions in a timely fashion, thus putting WSOF in the position of having to cancel the Fight and incurring substantial cost and damage to its reputation, and potentially putting the Company in a position to breach and lose its NBC agreement."
Wright alleges that this is when the company turned to him for a short-term loan. According to Wright, he made a $250,000 loan through his United Bamboo LLC with a maturity of 30 days at a 10% monthly interest rate. On Nov. 14, one day before the WSOF 15 show, Hesser signed over a promissory note to Wright's LLC in exchange for the funds.
That same day, Hesser appears to also sign a security agreement assigning all of MMAWC's "tangible personal property, fixtures, leasehold improvements, trade fixtures, equipment, video library, decagons, merchandise, furniture, computers, and other personal property; and all Debtor's intangible property, all cash and noncash proceeds (including insurance proceeds), all licenses, trademarks, websites and IP, domain names, contract payments, and assignment of all company agreements and fighter contracts..." as collateral in the event of a default. (Emphasis added)
Wright claims MMAWC defaulted shortly thereafter and, in 2015, he begins the process of securing his collateral. He sends a notice of default demanding immediate payment of all prior, secured debts to the tune of $1,268,235.62.
By July, WSOF allegedly became delinquent on payments for its new sublease and "on or about July 6, 2015, WSOF employees moved out of the Jones Property without right or authority and refused to honor the terms of the sublease." Wright's attorney noticed "two moving vans removing property that belongs to my clients," and demanded WSOF cease and desist. They didn't.
In all images below, Bloody Elbow has redacted personal contact information.
The story then takes another turn as WSOF enters into talks with the UFC for a licensing agreement "whereby WSOF would provide the undercard and the use of WSOF content in UFC's Fightpass subscription service." According to new WSOF CEO, Carlos Silva, negotiations escalated rapidly and the UFC made WSOF "a considerable and lucrative offer for a licensing agreement to use WSOF property."
Wright caught wind of the UFC negotiations and, through his attorney, sent a demand letter claiming MMAWC no longer had the right to enter into agreements for its intellectual property. He cc'd Dana White.
A short time later, the UFC's Chief Content Officer, Marshall Zelaznik, rescinded his prior offer.
Thus begins a barrage of lawsuits.
Hesser and Wright had already been removed from the company in July and on Sept. 11, MMAWC sued Shawn Wright, Tropyx, United Bamboo LLC, and Zion Wood O.B. Wan Trust for interfering with the UFC Fight Pass deal and a declaratory judgment on the validity of the purported security agreement. On Sept. 25, MMAWC sued Vincent Hesser, WSOF Asia, and Shawn Wright for trademark infringement and a declaratory judgment on the validity of the purported international licensing agreement. On Oct. 9, Michael Hesser sued MMAWC and Bruce Deifik for breaching the WSOF sublease. And on Oct. 26, WSOF Asia sued MMAWC, Carlos Silva, Keith Evans, Ali Abdelaziz, Barry Pincus, and Bruce Deifik for breaching the purported international licensing agreement.
WSOF has already won the right to use its collateral (e.g., fight library) to generate revenue while the issue of ownership is worked out in court. In the meantime, Hesser transferred his alleged international license rights to WSOF Asia which launched World Series of Fighting Global Championship (WSOF-GC), described on their Twitter account as "an independently managed company for the World Series of Fighting brand outside the USA."
WSOF-GC held its inaugural event in Hainan, China earlier today. WSOF has asked for a preliminary injunction to prevent WSOF-GC from promoting fights using its trademark, but the hearing isn't scheduled until December.
ACAK Sells Ownership Interest
Shawn Lampman took a plea deal for willful failure to file a 2007 tax return and was sentenced to 10 months in federal prison in January 2015. On May 6, ACAK's ownership interest was sold to Bruce Deifik, leading to a power shift and amendment to the operating agreement, allowing another peek inside the company.
We can also now get a feel for how much money appears to have been put into WSOF. In just two-and-a-half years, the owners' total capital contributions have tripled from roughly $2.4 million in 2012 to $7.2 million in 2015. The company's also accumulated over $7 million of outstanding loans.
Entering May, the largest capital and loan contributor was Bruce Deifik. His ownership interest had risen from 3.5% to almost 17.6%, but he wanted more. Lampman's mother was still the largest owner and Deifik, a commercial real estate businessman and former executive of American Nevada Co., struck a deal to purchase her entire stake for $2.2 million, as well as the EAB & ELB stake and half of Michael Paesano's units. Bruce Deifik is now the majority owner of WSOF.
But don't think of Deifik as having unlimited power quite yet. At MMAWC, member votes require a 75% super majority while board votes need only a simple majority. As of May 6, Deifik owned three of seven seats on the board with Hesser, Bendell, Iny, and Rogich accounting for the remainder. When Hesser was removed in July, it's unclear what happened to his board seat. If it went to Deifik, he would officially be the Fertitta/Viacom of WSOF. If not, he's always only one supporter away from control which is an awful lot of power for a man fight fans have basically never heard of.
That's the WSOF story as we currently know it. Capital contributions, alleged emergency loans, alleged failure to pay rent, contractual disputes, consolidation of power, alleged NAC violations. Oh yeah, and along the way they've put on some pretty fun fights.
Will they keep their international licensing rights and the rights to their video library and fighter contracts? Will they stay in business and reach profitability or get bought out? Will the NAC be satisfied with their Abdelaziz explanations? Only time will tell.
On the legal side, the WSOF's own attorney seems to sum up the situation quite bluntly with his comment to the judge in a Sept. 18th motion hearing, "I think it's safe to say, Your Honor, this is a tip of an iceberg that's going to be going through the court system quite a bit ..."
Paul is Bloody Elbow's analytics writer and former provider of expert witness support in antitrust cases. Follow him @MMAanalytics.