On August 29, 2018, the Securities and Exchange Commission (the “SEC”) filed a complaint in the United States District Court for the Eastern District of Pennsylvania against Mychal Kendricks, a linebacker for the Cleveland Browns, who at the time of the alleged activity played for the Philadelphia Eagles, and Damilare Sonoiki, a former investment banking analyst at a large investment bank, alleging multiple instances of insider trading from July 2014 through November 2014. During that time Sonoiki allegedly tipped Kendricks about at least four corporate acquisitions that his firm was advising in advance of those deals being made to the public, and based on those tips Kendricks made approximately $1.2 million in illegal profits off purchases of the securities of those companies. In exchange for his tips, Kendricks allegedly provided Sonoiki with cash, tickets to Eagles games and various other perks.
The crimes for which Kendricks has been charged could potentially result in a prison sentence as well as monetary fines. After the SEC filed the complaint, Kendricks released a statement admitting to the allegations and pled guilty to the insider training charges. Kendricks was released by the Browns later that day. On September 14, 2018, Kendricks signed a one-year, $790,000 contract with the Seattle Seahawks.
A few weeks later, on October 2, 2018, the NFL issued its own disciplinary action by suspending Kendricks indefinitely for violating the League’s Personal Conduct Policy. Specifically, Article 46 of the Collective Bargaining Agreement between the NFL and the NFL Players Association (“NFLPA”) gives the commissioner the power to fine or suspend any player “for conduct detrimental to the integrity of, or public confidence in, the game of professional football.” Kendricks has indicated that he and the NFLPA may seek to challenge the indefinite suspension on the grounds that, among other things, the punishment is harsher than the six-game suspension that is issued to first-time violators of the League’s Domestic Violence Policy. The written ruling from the arbitrator also suggests that the NFL may issue a more specific punishment fairly quickly.
With respect to his potential criminal punishment, Kendricks’ sentencing hearing is scheduled for January 25, 2019. Although Kendricks is facing up to 25 years in prison, he is more likely to receive a sentence between 30 to 37 months under federal sentencing guidelines. Last month, he issued a statement, stating: “While I didn’t fully understand all of the details of the illegal trades, I knew it was wrong and I wholeheartedly regret my actions.” It will ultimately be up to the discretion of the sentencing judge to issue a punishment that is deemed appropriate under the circumstances. If sentenced to the full term of 30 to 37 months, the sentencing could very well signal the end of Kendricks’s NFL career.