Michael Johnson accused of ‘secretly’ paying himself $500,000 as Grand Slam Track collapsed

Michael Johnson was accused of making a secret payment of half a million dollars to himself days before the failure of his Grand Slam Track project and while the company still owed millions to athletes and creditors.

Johnson is also accused of “feigning to the public” his concern for the athletes’ interests in the legal filing filed in the U.S. Bankruptcy Court for the District of Delaware.

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The filing reveals Johnson owed $2.2 million in GST himself. But he alleges he withdrew $500,000 (£370,000) on June 4 despite knowing the company was in dire straits.

“Mr. Johnson initiated a $500,000 payment purportedly under an unsecured note,” lawyers for an “official committee of unsecured creditors” say in the filing.

“It is shocking that Mr. Johnson secretly chose to prefer himself to athletes and other lay creditors, while pretending to the public that he was selflessly seeking to advance the interests of athletes.

“Moreover, at the same time, the debtor knew that he was in a precarious financial situation, without sufficient liquidity to complete the intended season.”

Another key accusation in the filing is that Johnson prioritized paying high-profile athletes such as Josh Kerr over other creditors in order to limit damage to his reputation.

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GST was presented as a project to “save athletics”, even though it only featured certain athletics events and excluded field disciplines. The inaugural season featured four competitions – one in Jamaica and three in the United States – with ambitious plans to hold competitions in Europe and attract young sports fans from around the world.

“We are obsessed with having the youngest fan base of any sports league in the world over the next five years,” said Johnson co-founder Steve Gera. The Independent a few weeks before the launch of the GST. “It’s our North Star.”

But ticket sales for the Jamaica opener were poor and although the US events were better attended, the fourth competition in Los Angeles had to be canceled for lack of money, after a major sponsor, Eldridge Industries, pulled out of a deal estimated to be worth almost $40 million. GST filed for bankruptcy in December.

The filing accuses GST of publicly claiming to have $30 million in funding when in reality it had only raised $13 million, the money from Eldridge Industries not being contractually guaranteed.

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GST said in a statement: “On behalf of Grand Slam Track, we are aware of the recent allegation by the UCC that GST secretly paid $500,000 to Mr. Johnson in lieu of paying the athletes and vendors. This claim is unfounded and false. As previously explained to the UCC, Mr. Johnson advanced millions of dollars for GST’s operating expenses, including travel, accommodation and athlete expenses, including one only part was repaid through the refund It is unfortunate that the UCC has chosen to ignore the facts and is instead attempting to discredit the company and Mr. Johnson through false statements.

Winners Alliance, GST’s main backer, was reportedly owed more than $15 million.

He said in a previous statement: “The public record clearly shows that Winners Alliance invested more capital, assumed more risk and ultimately suffered greater financial losses than anyone else.

“Winners Alliance invested millions, loaned millions in good faith and ultimately offered millions more to stabilize the Grand Slam Track and maximize recoveries for all stakeholders, including athletes, vendors and trade creditors.”