Shilo Sanders is in a legal dispute with a bankruptcy trustee over approximately $250,000 in alleged unauthorized fund transfers.
The core issue is whether Sanders’ NIL earnings belong to him or to the bankruptcy estate for his creditors.
Sanders filed for Chapter 7 bankruptcy in October 2023 to discharge over $11 million in debt from a 2022 civil court judgment.
The trustee in the bankruptcy case of former Colorado football player Shilo Sanders filed a response in court Dec. 17 that supports his argument that Sanders violated bankruptcy law by making unauthorized transfers to himself of approximately $250,000.
The court filing is the latest volley in bankruptcy case of Sanders, who filed a Chapter 7 petition in October 2023 seeking to get out of more than $11 million in debt.
The trustee in the case, David Wadsworth, sued Shilo Sanders in October, seeking recovery of the money and an accounting from Sanders. Sanders’ attorney then filed a motion to dismiss that complaint in November by arguing that the trustee had it all wrong.
The latest filing from Wadsworth’s attorney rebuts that notion as litigation related to the bankruptcy case continues on multiple fronts in addition to this one. Sanders’ debt stems from a civil court judgment in Dallas in 2022.
“The Defendants are wrong,” the trustee’s attorney, Peter Cal, said in court documents.
What is at issue in Shilo Sanders’ bankruptcy case this time?
The court-appointed trustee in this case is in charge of rounding up Sanders’ non-exempt assets for the bankruptcy estate to divide among his creditors. The trustee has alleged having trouble doing that and filed a complaint against Sanders related to money he traced in Sanders’ business accounts for earnings from his name, image and likeness (NIL). Those businesses are named as defendants with Sanders in the complaint – Big 21 and Headache Gang.
The big issue is who the money in question belongs to – the bankruptcy estate or Sanders. Sanders’ earnings before he filed the bankruptcy petition generally belong to the bankruptcy estate for the benefit of creditors, while earnings that came from work after the bankruptcy filing belong to Sanders.
Sanders’ attorney, Keri Riley, stated in court documents that the money in question belonged to Sanders because they were “post-petition earnings.”
The trustee disputed that in his response Dec. 17 and said such factual disputes can’t be resolved at this stage of the litigation.
Sanders “relies on the unsupported argument that all funds in the Big 21 Bank Account were post-petition earnings of the Debtor (Sanders),” the trustee’s attorney stated. “The Court should not consider the argument because it relies upon a factual assertion that is not included in the (trustee’s) Complaint.”
The trustee’s attorney then includes a footnote.
“Because there were funds in the Big 21 Bank Account on the Petition Date, the Defendants’ argument is demonstrably wrong,” the footnote states.
Timing of Shilo Sanders’ NIL earnings in dispute
The trustee’s attorney also noted that “even if the earnings are paid to the Debtor post-petition, they are considered prepetition earnings when they arose from a prepetition contractual interest.”
He argued the trustee pleaded his case well enough for the trustee’s complaint against Sanders to move forward. A bankruptcy judge will decide on that.
“It is more than plausible that at least certain of the post-petition deposits were based on the Debtor’s prepetition NIL contracts and, therefore, are subject to turnover,” the trustee’s filing states.
The trustee said he wants Sanders to “account for the distributions” after “improperly” exercising control over property of the bankruptcy estate.
How did the Shilo Sanders bankruptcy case originate?
A security guard at Sanders’ school in Dallas sued Sanders and his parents in 2016, alleging Shilo caused him permanent and severe injuries when he tried to confiscate his phone at school in 2015, when Shilo was 15. The parents were dismissed from the case before trial, but when the case finally went to trial in 2022, Shilo didn’t show up for it and got hit with a $11.89 million default judgment as a result.
The security guard, John Darjean, then moved to collect on that judgment in 2023, leading Sanders to file for bankruptcy to try to get out of it.
Darjean is fighting that with a separate complaint that alleges the debt should not be discharged in bankruptcy court because it stems from a “willful and malicious” injury. Sanders has claimed he acted in self-defense. That complaint remains pending, as does a separate complaint from Darjean that accuses Sanders of improperly omitting or concealing assets in his bankruptcy closures, which he denied.
What is Shilo Sanders doing now?
Sanders, 25, is out of football after being waived by the Tampa Bay Buccaneers before the season. He recently said he was moving to Miami and is pursuing other interests, such as acting and rap music.
He graduated from Jackson State before transferring to play for his dad at Colorado in 2023. Earlier this year, he also earned a master’s degree at Colorado in organizational leadership.
He is the middle of Deion Sanders’ three sons. His younger brother Shedeur is quarterback of the Cleveland Browns.
Follow reporter Brent Schrotenboer @Schrotenboer. Email: bschrotenb@usatoday.com