The story broke yesterday concerning Yahoo’s possible acquisition of Rivals, a popular sports content site. With the possible price rumored in the nine-figure range, details have now come to light concerning Rivals CEO Shannon Terry’s past run-in with the SEC that could threaten the deal altogether.

Here in Lexington, Rivals is a very popular site for fans of Kentucky basketball. Its forums have been ablaze ever since the abrupt departure of former head coach Tubby Smith and stayed hot throughout the entire search process which eventually landed Billy Gillispie at the helm of the program.

That community is just a small sampling of the large audience that comprises Rivals, which no doubt got the attention of Yahoo and prompted these acquisition talks. Rafat Ali at Paid Content first broke the story:

The price could reach around $100 million, which some we’ve spoken to say is overpriced, and that’s why the traditional sports media buyers are sitting out on this one. One exec involved in online sports acquisitions told us $50-75 million would be more realistic given a model that can—and has been—replicated and described the reaction to what Rivals was asking—$100 million—as “sticker shock.”

TechCrunch’s Michael Arrington, however, details a major snag that could cause the whole thing to fall through:

[T]wo previous deals to acquire the company died once it was discovered that the CEO, Shannon Terry, was found to have been involved in a classic “pump and dump” scheme, and violated the anti-touting and antifraud provisions of U.S. securities laws in 1998.

Detailed accounts from the SEC filing document exactly how Terry was involved in the scheme:

The Complaint alleged a massive ongoing market manipulation orchestrated by Huttoe in which he executed an unregistered distribution of tens of millions of SOE shares. 

The Complaint further alleged that Huttoe artificially inflated the price for those shares by issuing materially false press releases about nonexistent multimillion-dollar sales of SOE products, filing false periodic reports with the Commission, and bribing with SOE stock persons to tout SOE stock, including Melcher and Terry. 

As a final part of the scheme, Huttoe, Melcher, and Terry then took advantage of the inflated market by dumping shares on unwitting investors.

There has been no official response from Yahoo or Rivals concerning the rumor acquisition talks, nor any commentary from either side regarding the SEC filing.

Tags: Yahoo, Rivals, Shannon Terry, SEC