This past week, the Australian states of New South Wales and Victoria became the latest racing jurisdictions to impose sanctions on Phoenix Thoroughbreds, freezing Phoenix’s purse earnings while an investigation into money laundering plays out in the US. Previously, Phoenix had been banned from racing in Britain, where it had maintained a sizeable presence, and in France, where it had a Group 1 win. Meanwhile, in the US, Phoenix continues to race, with its Gulfstream Park Oaks (G2) winner Crazy Beautiful aiming for the Kentucky Oaks on April 30.
So, what is Phoenix Thoroughbreds, and why are racing regulators slowly, if unevenly, closing in on it? Phoenix was born in 2017, touted by its founder, Amer Abdulaziz, as “the world’s first regulated thoroughbred fund.” By 2018, it had become a presence at thoroughbred auctions around the world, buying 22 yearlings at that year’s Keeneland September sale for just under $9 million, an average of more than $400,000, making Phoenix the sale’s 4th leading buyer.
(Disclosure: I was a member of the bloodstock team that picked out horses for Phoenix at that sale.) In its brief life, Phoenix has already had Grade 1 winners in the US (Volatile and Dream Tree), in Europe (Advertise) and Australia (Loving Gaby and last year’s two-year-old champion Farnan). A new player, with lots of money to spend on horses, competing at the highest level – what’s not to like?
Apparently, there’s enough not to like that Bob Baffert, who trained Dream Tree to three graded-stakes wins, and Tom Ludt, the former Breeders Cup chairman and more recently Phoenix’s top racing executive, have both cut their ties with the operation in the past year or so. The reason: dramatic testimony in the November 2019 trial of now-convicted con man and money launderer Mark Scott that alleged that Abdulaziz and Phoenix were implicated in laundering funds from OneCoin, a fraudulent cryptocurrency fund that was actually just a pyramid scheme, paying off early investors with money from later innocents until the whole scheme collapsed, taking with it some $4 billion in investors’ money. According to that testimony, Abdulaziz and Phoenix not only facilitated moving the OneCoin funds around but also skimmed off about $100 million along the way. While Abdulaziz has steadfastly denied the charges and declared his innocence, and no criminal charges have been filed against him in connection with the OneCoin scam, he has also refused to identify any of his supposed investors in Phoenix, other than the now-convicted Scott. And there’s the troubling coincidence that OneCoin and Scott’s own company, Fenero Funds, seems to have had offices in a Dubai high-rise that served as Phoenix’s head office.
Scott, by the way, is still out on $2.5 million bail, with his sentencing repeatedly postponed, even as the US Justice Department pursues forfeiture action to recover whatever OneCoin funds he may still have. The current sentencing date is June 7, 2021 (appropriately, right after the Belmont Stakes, a race in which Phoenix’s Gronkowski finished second back in 2018), but may well be postponed once again, as it has been half a dozen times already, on the basis of vague doctors’ notes saying Scott needs more medical tests.
Unlike some other prominent, big-spending owners, Phoenix seems to have paid its trainers, bloodstock agents and other suppliers within a reasonable, if not necessarily prompt, timetable. But with the possibility of further revelations – perhaps Scott, facing up to 50 years in prison, will implicate Abdulaziz in an effort to get a more lenient sentence – racing folks who value their reputations are putting some distance between themselves and the Phoenix operation. And even in the US, where there has been no official regulatory action this far, Phoenix is down to barely 20 starts so far this year, with only the Kenny McPeek-trained Crazy Beautiful making the headlines.
Racing folks with long memories may recall an operation called IEAH Holdings, which campaigned Kentucky Derby and Preakness winner Big Brown back in 2008. Like Phoenix, IEAH touted itself as a kind of thoroughbred mutuel fund. And, like Phoenix, it seemed to have lots of money without very many actually identifiable investors. IEAH’s principal investor, James Tagliaferri later received a six-year prison sentence on securities-fraud charges, including taking kickbacks on the sale of IEAH securities, among other securities. IEAH’s brief moment in the spotlight ended in 2013, when it sold its remaining interest in Big Brown’s stallion career, though one of its founders, Mike Iavarone, has recently been listed as the co-owner of a few racehorses. Phoenix, for its part, did set up a company in the European tax-haven jurisdiction of Luxembourg that was intended to operate as that “regulated fund,” but the company never went through the regulatory process and later filed for voluntary liquidation without ever having operated.
Phoenix may have done nothing wrong; that’s what Amer Abdulaziz says. But when regulators in at least three major racing jurisdictions impose sanctions on an owner, that at least raises some questions. If you want to open a bank account in the US, you must, under the know-your-customer rules enacted way back in 2001, supply a reasonable amount of information. But if you want to buy a racehorse or get an owner’s license, the initial scrutiny is, to say the least, minimal. If you have money, and if you don’t have an actual criminal conviction on record, most states will be happy to license you. One doesn’t want to discourage new owners from getting into the game, and one certainly doesn’t want to perpetuate the racism, sexism and classism that have dominated American racing for far too long, but maybe a little more initial scrutiny would be a good idea. Admittedly, Hong Kong is a special case, with the Hong Kong Jockey Club, the racetrack operator and the regulator, being the same entity, but their more-intense scrutiny of prospective owners has largely averted financial scandals, while having the very helpful side effect of guaranteeing funds for the retirement of horses once their racing days are over. Maybe there’s something to learn from Hong Kong’s licensing rules.
Meanwhile, if Crazy Beautiful wins the Kentucky Oaks, I’m guessing that Phoenix Thoroughbreds will be taking its money out of the Churchill Downs purse account the minute it’s available.
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