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« | Home | »

Scandals in MMA — and don’t forget about Xyience

By Zach Arnold | December 30, 2009

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I have two articles left to write in the Fight Opinion Five article series and I will get those done soon. As you might suspect, the last two topics will deal with scandals in Mixed Martial Arts. I remember a tagline that Ryan Harkness once attached to me, which is that I do my best work when there is a scandal brewing or when a company is dying. True or not, I am often associated with covering the biggest scandals in MMA this past decade.

One person who also found his name involved in scandal was Rich Bergeron. Bergeron has been aggressively campaigning against individuals that were involved in Xyience. If you recall, Bergeron found himself on the end of the lawsuit and having to defend himself pro se. Bergeron was dismissed as crazy and a lunatic, but as the Xyience situation unravels, it looks like the facts may be more friendly to Rich than people first thought.

If you don’t recall what scandal there was involving Xyience, search here. In short, Xyience was that beverage drink that fighters were pushing because they were sponsoring UFC fighters. And of course, Xyience management had been friendly with UFC management beyond MMA circles. Then the dirt-digging started to happen and that’s where Rich found that where there is smoke, there may be fire. Eventually, Xyience went bankrupt but the Fertitta empire (through a company called Zyen, LLC) took over. This is why you still see Xyience at UFC events. Xyience product is getting distribution clearance in various places now across the States.

The whole key to the scandal involving Xyience and how it went bankrupt is very complicated, which is why as a scandal it didn’t gain the traction that you thought it might have. If you can’t explain a scandal in a paragraph or two and it involves a ton of layers of facts to analyze, expect people’s eyes to glaze over. My opinion on what happened with Xyience is that as a scandal, it has/had all the key ingredients to blow up into something bigger if bigger media outlets focused on it and realized why UFC management thought Xyience was so important. Remember — when UFC took out those loans a few years ago (along with that revolving line of credit), was Xyience or PRIDE part of what was listed as key assets? Bergeron made the claim that Xyience was and he further claimed that if you connected the dots that you could show what was “really going on” between Xyience and UFC.

The key problem that Bergeron and others who paid attention to the Xyience scandal have in terms of getting the public interested is that no one has shown the hardcore fans, let along the casual fan why they should give a damn about a beverage drink maker going bankrupt and how UFC management having a close relationship with former owners of Xyience means anything in relation to the business end of UFC itself.

Compare and contract the Xyience scandal to the yakuza scandal involving Shukan Gendai’s negative campaign with PRIDE — the weekly magazine connected the dots and made claim after claim regarding not only mobsters, but also claims against Fuji TV sports producer Kunio Kiyohara (who was a powerful figure because his father was a big name in the newspaper industry). In the States, few people online believed the scandal would go anywhere. The truth is that Gendai, along with other media outlets in Japan, started picking up on the story and figured out ways to convince people that it was important. Combine that with the fact that shame still means something in Japan and you had a scandal that brought down PRIDE.

As for Xyience? It’s 2010 and people may not care about the scandal, but there may be good legal reason to care. The liquidating trustee for Xyience in bankruptcy proceedings has filed a complaint against Zyen LLC and Fertitta Enterprises in relation to Xyience. Station Casinos is struggling and things have not been going swimmingly lately for the Fertitta family. In the legal document linked in this paragraph, the liquidation trustee writes the following paragraph:

This Adversary Complaint arises from the premeditated decision of Fertitta Enterprises, including one of its officer and lead operators (Mr. Bullard), to take over ownership of the Debtor while stripping the Debtor’s secured and unsecured creditors of the considerable value that they possessed through their claims against the Debtor and its assets.

Document translation: Xyience got bankrupted on purpose by Xyen LLC (Fertitta) so that they could take over the assets and rip off the creditors.

I would strongly urge you to read that legal document and look at the full complaint by the Trustee. It’s very direct and blunt in terms of its accusations against the Fertittas and Zyen LLC. Here’s one more paragraph to give you a sample of just how direct the complaint is:

When it became evident that the Debtor’s financial structure — that is, its secured and other unsecured creditors, and the substantial number of outstanding stockholders — would render an ordinary takeover through stock acquisition too expensive, Zuffa and its owners decided instead capture the company through a series of secured loans, forced defaults and then a foreclosure of the assets.

And this may just be the beginning of the legal trouble brewing over Xyience.

On page 8:

On October 5, 2007, the Debtor used the Zyen loan proceeds to make the following payments, among others: (a) $4.5 million to Zuffa (substantially all of which was on account of missed payments under the January sponsorship agreement): (b) $1,029,166.67 to Fertitta Enterprises: (c) $257,187.50 to Mr. Frank: and (d) $257,187.50 to Mr. Sanford.

On page 9:

Despite knowing that the Debtor would be defaulting on its sponsorship agreement, and thus would be prohibited from selling merchandise containing the UFC label and trademark, Messrs. Bullard, Frank and Sanford, throughout November and December 2007, caused the Debtor to order and have millions of dollars worth of product manufactured with the UFC label so that the Debtor would be forced to deal with Zuffa, on Zuffa’s terms, when following the Zyen strict foreclosure, the Debtor was forced into a bankruptcy proceeding.

In December 2007, as the parties had planned, Zuffa terminated the October sponsorship agreement.

The complaint goes on to claim that the parties involved were involved in an inside transfer scheme that violated Nevada’s Uniform Fraudulent Transfer Act, along with Breach of Fiduciary Duty claims.

I applaud anyone who is doing the dirty work in finding out information regarding this case. The challenge for those who seriously believe that there is a story here that the public should care about is how to market this story, how to tell it, and how to package it in a way where people can simply connect the dots and be able to tell their friends about it without forgetting what exactly the scandal is about.

The truth is that the usual suspects in the media will not touch this story — it’s too under the radar and it’s simply high-risk, no-reward. I don’t expect many blogs or micro sites to touch the story either because it bores them to tears, so whoever keeps up on this case is going to have to do a really good job of trying to convince the opinion makers (writers) to mention it if they want to keep this full steam ahead. Plus, everyone is afraid of getting sued.

The fact that the Xyience case has now hit the court system is an advantage in terms of comparing this scandal to the yakuza scandal that destroyed PRIDE. PRIDE was taken down by a weekly magazine. In the Xyience case, we have a legal paper trail developing.

And that paper trail is going to prove to be fascinating in relation to how Xyience was presented on the financial paperwork that Zuffa LLC filed to get the hundreds of millions of dollars they borrowed. Now that we know that some of that Zuffa debt was purchased by parties such as Mark Cuban, what will happen if someone like the Xyience Inc. trustee can prove in court that fraud took place by the Fertittas?

Topics: Media, MMA, UFC, Zach Arnold | 17 Comments » | Permalink | Trackback |

17 Responses to “Scandals in MMA — and don’t forget about Xyience”

  1. Rich Morrison says:

    “The truth is that the usual suspects in the media will not touch this story — it’s too under the radar and it’s simply high-risk, no-reward. I don’t expect many blogs or micro sites to touch the story either because it bores them to tears, so whoever keeps up on this case is going to have to do a really good job of trying to convince the opinion makers (writers) to mention it if they want to keep this full steam ahead.”

    I agree, Zack! This story has ALWAYS been too boring and contrived to follow or care about. But I do admire your tenacity and passion!

  2. This is a tough story to sex up. It isn’t all that glamorous. In fact, it’s sad and disgusting. I’m amazed sometimes at how deep I got into it myself. I’m sure the future will drag me even deeper.

    Scams are complicated for a reason. The more people that are involved, the easier it is to spread the blame and make the investigators wonder aimlessly about who is connected to who. The most intriguing aspect here as far as the “why should I care” mentality involves how the UFC brass treated Xyience when they finally got control of it.

    The reality is the UFC took control of Xyience and paid themselves back first before any other creditor. (See: Trustee complaint.) The millions they paid themselves as part of the takeover and bankruptcy process actually alienated their very own fighters with outstanding sponsorship contracts left unpaid for months on end. The UFC’s own first family, the Fertittas, showed their true colors immediately after seizing Xyience. They gave a heads up to fans of the UFC that when push comes to shove they’ll always choose to pad their own bottom line before taking care of their own fighters.

    The whole amount owed to fighters by Xyience didn’t even total a million bucks with many fighters still left unpaid well into the bankruptcy. The Fertittas and Dana White vultured their way into the sport of MMA and got rich off the backs of better men than themselves, men who literally bleed to further the company’s bottom line. It’s the ULTIMATE disrespect.

    The other intriguing aspect in light of this unexpected trustee twist regards the Station Casinos bankruptcy. If this was a perpetrated bankruptcy, was that one done intentionally as well? What tricks were up their sleeves in that process? When will the house of cards fall apart? Stay tuned. Fact is stranger than fiction, and all the sexing up in the world can’t prepare us for the reality that might take place next.

  3. Mark says:

    Yeah the difference between Yakuza shadiness and mediocre supplement company shadiness makes the difference. Organized crime is always highly entertaining. If Zuffa got caught as a shadow organization for the Gambino family or something, the press would be running each other off roads trying to be the first to make it to ambush Dana and the Fertitas for interviews. But a company doing simple corporate shadiness is boring. People barely cared about Enron just because it involved so much money and that actually had economic ramifications. Even if it did get covered no one would care. The oiled up chick dancing to Public Enemy and explosions from the commercial would have to announce she had been having sex with Tiger Woods at the time to get any notice.

  4. 45 Huddle says:

    This is a non-issue. What happen with Xyience is typical business practice in 2009. Businesses act just like the mafia now, only they have the laws and lobbyists on their side. Nothing will ever happen of this.

  5. Joseph says:

    WOAH, WAIT A MINUTE! Are you saying that the Fertittas let the UFC (Meyrowitz) go bankrupt and not lobbying for the “sport”, then once the sport was banned, taking over the company for cheap and shortly thereafter legalizing the sport due to the Fertitta’s ties to the NSAC?

    WOW!

  6. Zack says:

    “Organized crime is always highly entertaining. If Zuffa got caught as a shadow organization for the Gambino family or something, the press would be running each other off roads trying to be the first to make it to ambush Dana and the Fertitas for interviews.”

    Do you know anything about the Fertittas? A good start would be googling the combo of Fertitta & Galveston, TX.

  7. Zak says:

    I think the easiest way to summarize this story is the restaurant scene in Goodfellas, where the mob takes over the restaurant and leech it for all its worth before setting it on fire for the insurance money.

    Good imagery at the very least…..

  8. […] think they would handle the pressure of a big media outlet like the Wall Street Journal focusing on what’s happening with Xyience and the story’s relation to Zuffa, the parent company of UFC? How do you think the reaction […]

  9. […] interest in the above-linked story that I posted on The Bleacher Report Web-site. A commenter on This Story at FightOpinion.Com about the recent Xyience scandal’s resurgence says it all about the public’s ignorance […]

  10. Don M says:

    Has anyone really looked into these people, Kirk Sanford for instance?
    It appears that when Sanford wants something that he can’t have, he just decides he can defraud people out of it.

    In June of this year, an Arizona Department of Gaming investigation concluded that Sanford, while he was CEO of Global Cash Access Holdings (GCA), obtained State certification through fraud, willfully failed to disclose documents, misrepresented facts to State regulators and defrauded VISA and Bank of America out of $26 million.
    Here’s a link to the Arizona Department of Gaming Investigation:
    http://www.docstoc.com/docs/8218110/Global-Cash-Access-Notice-of-Intent-to-Deny-Gaming-Services-License

    In October 2007, after a GCA audit committee meeting, Sanford resigned from GCA saying he wanted to be with his family. It is common knowledge that Sanford spends more time with a bottle than his family. Two weeks after his resignation, an investigation of GCA was announced and GCA stock dropped from $10 a share to $3 a share in one day. Sanford, being the blatant cook he is, couldn’t control himself and sold millions of dollars of his GCA stock between $10 and $16 per share before the investigation was announced. He was sued in five GCA stockholder lawsuits alleging stockholder fraud and SEC violations.

    But Sanford wasn’t satisfied with this. When Sanford went to Xyience, he told the company’s management of how he built GCA into a billion dollar company, leaving out how he defrauded VISA and Bank of America. Sanford became Co-CEO of Xyience with Adam Frank, another total character. Together, Frank and Sanford along with Willaim Bullard hatched a plan to defraud Xyience investors out of the entire company and hired one of Sanford’s cronies, Omer Sattar, to do there bidding and continue their fraud through the bankruptcy. They are all defendants in the Xyience bankruptcy case. Talk about habitual criminality.

    But it doesn’t end there. Now Sanford is actually seeking investors for two new companies, Sightline Payments and Sightline Acquisition, that he runs with Sattar. And guess where Sanford met Sattar? At GCA!

    How this scum isn’t behind bars is beyond me.

  11. […] hormone sponsor in the past?) He’s now aligned with Xyience. Yes, the same Xyience that has a bankruptcy trustee legally questioning the business behavior of Zuffa in the way Xyience assets were handled. Zombie Xyience will never go away, it seems, as a […]

  12. […] Tapout. The last time MMA reporters showed this much disinterest in a scandal was in 2009 during the Xyience debacle between Rich Bergeron and Zuffa when Xyience went bankrupt, creditors were stiffed and Zuffa took over the […]

  13. http://writingfortruth.blogspot.com/2014/06/convenient-accident-or-cold-blooded.html

    Let’s not forget what happened with the Fertittas in Missouri and where this family learned the tricks of the trade.

  14. […] The brand also carries some unfortunate baggage. Launched in 2004 by a white-collar criminal named Russell Pike — who had previously been convicted on felony charges ranging from bank fraud to money laundering — Xyience Inc. filed for bankruptcy following an ugly dispute in 2008, and its assets were quietly taken over by a Zuffa offshoot called Zyen, LLC. […]

  15. […] The brand also carries some unfortunate baggage. Launched in 2004 by a white-collar criminal named Russell Pike — who had previously been convicted on felony charges ranging from bank fraud to money laundering — Xyience Inc. filed for bankruptcy following an ugly dispute in 2008, and its assets were quietly taken over by a Zuffa offshoot called Zyen, LLC. […]

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