Earlier this month, Sports Illustrated abruptly ended its partnership with The Cauldron, an independent sports blog that had a modest but devoted readership, and had made waves with a number of viral posts written by pro athletes like Steph Curry. The breakup was covered in straightforward fashion by a few sports and media blogs.

But there’s much more to the story: impersonations, fake emails, and a forged term sheet.

It is a convoluted tale, but it’s worth climbing down this rabbit hole. It’s the tale of a sports media acquisition gone very wrong, and how the broken deal ensnared a number of big-name media companies and venture capital firms (in New York, California, and even China) along the way.

The Cauldron + Sports Illustrated

The Cauldron launched on the publishing platform Medium in June 2014; Medium shared revenue with The Cauldron based on traffic and engagement time. The site’s founders were Jamie O’Grady, a Wall Street securities lawyer who lives in Raleigh, NC, and Andy Glockner, a veteran sportswriter who has worked for ESPN.com and SI.com.

The Cauldron was open for freelance submissions, with a focus on athlete-written posts. In its early days, the site scored hit posts from Steph Curry (on private coaching), Le’Veon Bell (on his mother), and Chris Kluwe (on the Gamergate controversy). Many credit the site with establishing a Players’ Tribune model (the website owned by Derek Jeter, where big-name athletes often make big announcements), five months before The Players’ Tribune came along.

The Cauldron built enough credibility that in September 2015, it announced a digital partnership with Sports Illustrated. The Cauldron left Medium and moved over to SI’s web platform, where it was hosted at an SI.com/cauldron URL.

Time Inc. (TIME), the parent company of SI, Time, Fortune, and other legacy print magazines, makes partnerships with third-party digital outlets all the time, but they vary greatly in how extensive they are. A spokesperson says its partnership with The Cauldron was never very extensive. Time Inc. has made far more comprehensive partnerships with Fox Sports Digital, and with FanSided, which it bought outright.

Time Inc. never bought The Cauldron, and never invested in it. The digital pact was based on mutual traffic benefit: more original content for SI via The Cauldron, and more attention for The Cauldron, thanks to having a seal of approval from a top name in sports media.

Three months into the partnership, employees at The Cauldron grew frustrated with Time Inc.’s technology, multiple people from the site say. They felt that The Cauldron’s content had looked crisper and cleaner on mobile when it was hosted at Medium, and that it looked janky on the SI platform. So in December 2015, The Cauldron returned to Medium, which had just rolled out a new option that allowed partners to remain hosted on Medium but use an external URL.

That meant The Cauldron could return to Medium but keep its partnership with Time Inc intact. The Cauldron kept the SI.com/cauldron web address, and its site read, “Presented by Sports Illustrated.” SI typically chose one story from The Cauldron each day to promote on its SI.com homepage.

At its peak, The Cauldron was posting around 100 original stories per month and garnering 2 to 3 million monthly unique visitors, all under the label of an SI partner site.

The Cauldron seeks new investment

In early 2016, shortly after The Cauldron had returned to being hosted on Medium, Jamie O’Grady got a heads-up call from someone at Medium to alert him (apologetically, he recalls) that the former ESPN personality Bill Simmons was bringing a new sports site to Medium.

“I was really devastated to hear that,” says O’Grady. He knew that the Simmons-led site, The Ringer, would attract a lot of attention at launch, and figured it would become the top sports blog hosted at Medium, likely cutting into his own site’s traffic. So he began reaching out to potential investors, framing The Cauldron as a challenger to The Ringer and to The Players’ Tribune, which was now in full swing.

O’Grady had already met with top digital brass from SI and Time Inc. in the summer of 2015 seeking investment. Time Inc. did not invest, but encouraged him to seek investment elsewhere. O’Grady says that Time Inc. repeatedly indicated it would be open to investing at some point or deepening the content partnership. (The Cauldron was initially incubated and seeded by Medium, and later self-funded by O’Grady; it didn’t have any outside investors.)

O’Grady embarked on a slew of pitch meetings with media companies, seeking partnerships, investments or a full sale. His pitch: The Cauldron would continue to post original stories, but ramp up posts by athletes, and ramp up original video with athletes, and create an athlete-hosted podcast network; it would take on The Ringer and The Players’ Tribune.

He met in person with CBS, BuzzFeed, Uninterrupted (LeBron James’ production company, which has $16 million in funding from Time Warner), and others. He had calls with Bleacher Report, Huffington Post, Vox, Sporting News and others.

He also met with VC firms, including Red Seat Ventures, launched by former execs from Glenn Beck’s digital network TheBlaze, and CourtsideVC, an early-stage investor in sports tech platforms like sneaker site StockX. At Courtside, he met with Vasu Kulkarni, founder of a sports video analytics startup called Krossover.

Kulkarni, known to be a mover and shaker in sports tech, introduced O’Grady to a man named James Yoder, founder and CEO of a Silicon Valley sports media startup called Chat Sports.

Kulkarni confirms that both The Cauldron and Chat Sports had pitched CourtsideVC, and that Courtside did not invest in either one, and that he connected O’Grady to Yoder. Kulkarni vigorously emphasizes that apart from introducing the two men, he played no part in their interactions afterward.

That was a pattern in the reporting of this story: none of the nearly dozen different investors Yahoo Finance interviewed (including Chat Sports investors as well as outside investors that took a meeting with O’Grady or Yoder) wanted to be named or quoted by name. They wanted nothing to do with this story. Once you’ve heard what unfolded, it’s clear why.

Chat Sports offers to buy The Cauldron

After being introduced through Kulkarni, Yoder and O’Grady had a series of phone calls about what The Cauldron and Chat Sports might be able to do together.

Yoder, a former product manager at Verizon, launched Chat Sports in 2012. The site began mainly as an aggregator, with a desktop site and mobile app that personalized a feed for users based on their favorite teams, plus original posts written by contributor writers. The app looks a lot like Bleacher Report’s popular TeamStream app.

“We wanted to index the Internet, create a Reddit for sports,” Yoder tells Yahoo Finance. More recently, Chat Sports has shifted its focus to Facebook Live videos, in which writers conduct mock drafts and discuss trades. “We are without question the market leader in Facebook Live,” Yoder says. “We produce the highest-quality videos.”

(Last week, Chat Sports published a blog post claiming it reached a total audience of 100 million people in January, partly fueled by “the sports industry’s foremost Facebook Live studio.” It would be an astonishing number for a Facebook page that has 138,000 followers.)

Chat Sports also holds recurring live panels under the name Minds Behind the Game; past speakers have included Cleveland Cavaliers owner Dan Gilbert and San Francisco 49ers owner Jed York. The last Minds Behind the Game event was last August.

In June 2016, Yoder flew to Raleigh to meet O’Grady. And in July, Yoder offered to acquire The Cauldron for $1.8 million.

The purchase would be contingent on Chat Sports raising a Series A investment round by pitching the combined entity. (O’Grady says he thought that he would be closely involved in the fundraising process, but quickly found that Yoder did not include him in the effort.)

Chat Sports and The Cauldron, together, would “build the preeminent sports media company in the world,” Yoder wrote to O’Grady. Both men tell Yahoo Finance they were, at first, thrilled about the deal.

Yoder sent O’Grady an LOI (letter of intent) that stipulated Yoder and Chat Sports would pay O’Grady $20,000 upfront, regardless of whether the acquisition went through, and an additional $30,000 breakup fee if it collapsed. The parties agreed.

In a pitch deck Yoder created, he presented the combined team of The Cauldron and Chat Sports, complete with photos and bios of the top executives. He included O’Grady as well as boardmembers John Cantarella, a former Time Inc. executive now at Facebook, and Mike Levy, founder of CBS Sportsline. (Cantarella and Levy both declined to speak to Yahoo Finance; Yoder says Cantarella is no longer a Chat Sports boardmember, but still “has a strong relationship with the company.”)

“We are raising a $5 million Series A to grow this sports media power,” one slide read. “The funds would be used to expand The Cauldron team, grow our video team, begin direct sales efforts, and accelerate user acquisition.”

A fake email, a fake term sheet

In the late summer and early fall, communication between O’Grady and Yoder crumbled. For nearly three months, O’Grady says, Yoder was purportedly taking pitch meetings with firms, but was difficult to reach and cagey on the details of his meetings.

(Two separate sports media founders tell strikingly similar stories:

Tim Livingston of TheLead says James Yoder and Chat Sports made a “very generous” offer to buy TheLead one year ago, but then Yoder “became a ghost and I never heard from him.” Months later, Yoder got back in touch and said he now wanted to buy both TheLead and The Cauldron. Livingston had a phone call with O’Grady and liked him, but came away thinking that the two were competitors and couldn’t coexist. Livingston moved on.

DJ Gallo, founder of the sports comedy site Sports Pickle, also got a job offer from Yoder to join “the Chat Sports-The Cauldron powerhouse” [in Yoder’s words in the offer letter] in a senior role, at a base salary of $125,000. O’Grady had recommended Gallo to Yoder. Gallo spent a weekend in Raleigh with O’Grady discussing the job. But the talks stalled, Gallo says, because Yoder “was very cagey and it was always very hard to get ahold of him. He would say, ‘I have 10 minutes to talk, from 11:45 pm to midnight.’ It was odd.”)

Yoder tells the story differently than O’Grady. He says that while he was taking meetings with potential investors, O’Grady surreptitiously contacted many of them afterward to see if they might want to invest in The Cauldron, separately from Chat Sports. O’Grady vigorously denies this, and Yoder declines to give any example of any firm that O’Grady interfered with.

Yoder adds that from August through October, as he took pitch meetings, “There didn’t seem to be any noticeable interest in The Cauldron. They had a small user base, and what they did have was only thanks to Time Inc. It wasn’t really moving the needle for us.”

Nevertheless, on Nov. 9, 2016, Yoder emailed O’Grady with what looked like good news: Chinese investment firm WI Harper, Yoder wrote, committed to invest $2 million in Chat Sports as lead investor in a new $5 million Series A round, with the other investors still to be named. Months prior, Yoder had met with WI Harper (he confirms), which has offices in San Francisco and has invested in TV-maker Vizio, photo app Shots, dating app Coffee Meets Bagel, and others.

In that email, Yoder attached an executed term sheet (a document outlining the terms of an agreement to invest) from WI Harper; it was signed by Yoder and by Lee Chang, a partner at Harper. The term sheet did not name The Cauldron or O’Grady. Yahoo Finance has seen the term sheet.

Yoder also cc’d on that email three partners at an investment firm in Los Angeles led by a renowned sports agent. O’Grady had met with this firm in early 2016 as he pitched around The Cauldron, and he had walked away with the sense that the firm was willing to participate in a Cauldron funding round, but not as lead investor. O’Grady later advised Yoder to keep that firm in the loop if and when Yoder succeeded in landing a lead investor for the round.

A partner at that firm confirms a meeting took place with O’Grady at the beginning of 2016, and says they “had a good chat,” but never made an offer. The firm did not want to be named, and the partner says the firm never had any intention of investing in The Cauldron. But Yahoo Finance has seen communications that strongly suggest otherwise, in which the same partner mentions a “possible acqui-hire” scenario for O’Grady and The Cauldron in May 2016. In other words, it appears the firm was quite close to investing in The Cauldron before the situation devolved after The Cauldron linked up with Chat Sports.

Receiving the WI Harper term sheet renewed O’Grady’s faith in the acquisition. And in December, O’Grady received an email from a lawyer claiming to represent Chat Sports. The email asked O’Grady for documentation on the structure of The Cauldron, now that the $1.8 million acquisition would be moving forward. The email was signed by Phillip Closius and sent from [email protected]. (Yahoo Finance has seen the email.)

O’Grady was pleased, and replied to the sender with additional logistical questions, and asked to set up a phone call. He did not get a reply for 48 hours. He did an online search and found that Closius is an attorney at the Baltimore firm Silverman, Thompson, Slutkin & White, and also a professor at University of Baltimore’s law school. Closius does not list [email protected] as his email address on his web site, and web searches for the address yield no results.

O’Grady sent an email to Closius’s professional email address at the Baltimore law firm, referencing the email he had received from the Closius gmail address. A few hours later, O’Grady received a voicemail from Closius in which Closius said, “I’m just calling to tell you I have no idea what you’re talking about in this email about closing docs, so I’m sure you have the wrong person, please deal with it.” (Yahoo Finance has heard the voicemail.) O’Grady was alarmed. He reached Closius by phone and asked Closius if he knew James Yoder. He says that Closius told him yes, and that Yoder is a family friend, but that he does not represent Yoder.

Next, O’Grady responded to the email from [email protected] and added Yoder, telling Yoder he had reached Closius by phone, and demanding that Yoder explain. Yoder responded to both O’Grady and Closius and asked, “Why are you speaking on the phone?!? What the actual F is going on here.”

Yahoo Finance reached Closius by phone. The moment he heard the name Chat Sports, he said, “I don’t really do that much with those guys at all” and hung up.

Because his suspicions had been raised from his interaction with Closius, O’Grady contacted the offices of WI Harper. He reached the partner whose name was signed on the term sheet, Lee Chang, whom O’Grady says had never heard of O’Grady or The Cauldron. Chang did recall meeting with Yoder, but said WI Harper turned Yoder down. (WI Harper did not reply to multiple interview requests and calls.)

O’Grady sent Chang the WI Harper term sheet he had received. Chang responded to O’Grady by email: “I can hereby confirm that this term sheet is indeed fraudulent and that the signature has been forged in my name on behalf of WI Harper Group… We appear to have both been victimized by this intentional act of defraudment.” (Yahoo Finance has seen the email.)

Chang also wrote in his email to O’Grady that WI Harper would be sending a cease-and-desist letter to Chat Sports. But after a phone call with Yoder (in which Yoder says he told them his side of things), Harper also sent a cease-and-desist to O’Grady, asking him not to disseminate the fake term sheet.

Explaining faked communications

Yoder blames both the fake Closius email and the fake WI Harper term sheet on O’Grady.

He confirms that Closius is a friend; Closius’s son is Yoder’s best friend. Yoder says Closius was representing Chat Sports on its acquisition of The Cauldron, but never had reason to talk to O’Grady, which is why Closius did not know O’Grady when O’Grady contacted him.

As for why someone claiming to be Phillip Closius emailed O’Grady from a suspicious gmail account, Yoder initially told Yahoo Finance that he believed O’Grady created the closiuslegal gmail account and emailed himself from it. “Our assumption is he created a fake email to act like our lawyer tried to get in touch with him,” Yoder says. As evidence, Yoder says that at some point in their discussions, O’Grady raised the idea of putting some of the money involved in the deal in escrow. “I had never heard the word escrow in my entire life,” Yoder says. “And that word is in the email that fake Closius sent to O’Grady, and I find it very interesting and convenient that the term that Jamie brought up is in that email.”

But O’Grady says he never heard of Phillip Closius before receiving the email from [email protected], and that Yoder had never mentioned the name to him. “Why would I send myself an email from a man I had never heard of?”

And on a follow-up call, Yoder revised his answer. When asked again about the fake Closius email, he responded, “I have a prepared statement for this,” and read aloud: “We are very sorry that Jamie O’Grady felt misled, but we were doing our best to make a Series A happen and we regret it couldn’t happen.”

As for the term sheet, Yoder says O’Grady downloaded, without permission, a “draft” of a term sheet from a Chat Sports Dropbox folder and edited it, and that it was this version, fraudulently edited by O’Grady, that got sent around. On a call with Yahoo Finance, Yoder initially said he believed O’Grady sent around the term sheet himself from Yoder’s email address.

But on a follow-up call, Yoder revised his answer. He now says that he, Yoder, did send the email, but didn’t know the document he attached, a draft of a term sheet, had been fraudulently edited by O’Grady. Yoder says that he had received an email from a Chinese email address claiming to be a representative for a different firm Chat Sports was talking with (Yoder declined to name it), and claiming that this other firm wanted to make its investment through WI Harper. Yoder believes this Chinese contact was actually O’Grady assuming a fake identity.

“I don’t know why Jamie targeted WI Harper,” Yoder says. “The only thing we could come up with is that he saw us as a mark—steal our investor contacts, steal our existing investors, pitch them, trash us, get access to our models and strategy.” Yoder says O’Grady did something similar to at least four other firms, but Yoder declines to name them.

As proof of his story, Yoder forwarded Yahoo Finance a follow-up email he sent to the partners at the LA firm that had been cc’d on his original term sheet email, alerting them that the term sheet they had been sent was fraudulent. Yoder’s point: as soon as he realized that O’Grady had fabricated a term sheet and sent it to this firm, he emailed to alert them.

But that email from Yoder to the LA firm was sent on Jan. 17—six days after O’Grady had already gotten in touch with the firm to tell them his side of the story. A partner at that firm now says, “I would be very surprised if Jamie was fabricating all this. He struck me as extremely forthright. On balance, I would say Jamie is much, much more credible.”

O’Grady acknowledges he downloaded documents from the Dropbox, but says he downloaded them from a link Yoder sent him, and says he was never told not to access the folder. He adds, “How would I know who Lee Chang at WI Harper is, how would I know to fraudulently sign Lee Chang’s name to it?”

To recap: All parties confirm that someone sent around a fraudulent WI Harper term sheet; that is not in dispute. All parties confirm that a fake email was sent by someone posing as Phillip Closius; that’s also not in dispute.

Sending a false term sheet over email, legal experts say, could constitute wire fraud, a felony that carries up to 20 years in prison. Sending an email posing as someone else could constitute aggravated identity theft, which is also a felony.

Yoder says that Jamie O’Grady is a “master of creating fake emails.”

As a demonstration, Yoder sent me, at my work email address, a fake email that made it look like I had emailed Yoder asking for help finding clean urine. Yoder stressed that he faked an email from me strictly to show me what O’Grady does.

After I privately forwarded the email to my editors, Yoder emailed me again asking why his email had been opened multiple times; he had tracked the email. “We track every email we send,” he says. “We use an email tracking service.”

Once O’Grady heard back from WI Harper, O’Grady went into full alarm mode. O’Grady’s attorney sent Yoder a demand letter asking for the remaining $6,600 of the $20,000 fee O’Grady was promised in the original LOI – he received that $6,600 the next day; Yoder had already wired it.

O’Grady’s demand letter sought an additional $180,000 in damages suffered to The Cauldron. “We arrived at that number,” O’Grady said, “because the deal on the table was $1.8 million, but I clearly wasted five months, I’ve skipped other avenues of investment, so let’s call it 10 percent.”

Yoder countered with a demand letter of his own, in which the language was almost exactly the same as the text of O’Grady’s letter, but Yoder’s demand letter sought $10 million in damages. He says that’s because O’Grady sent Facebook around 100 takedown requests that forced Chat Sports to remove Facebook videos in which it had embedded The Cauldron’s logo. Yahoo Finance has seen both demand letters.

More questions about Chat Sports

In its early days, Chat Sports posted original content from many different writers—some of those bylines, like Rick Steele or Tipp Smith, have Twitter accounts that have tweeted only one time. Were they fake? Yoder says yes. “Absolutely we had fake writers,” he says. “That’s because we’re a scrappy company. What do you have when you start a company? You have zero traffic, you have zero name brand… So we had a writer program for college-aged kids… and sometimes they had information about things that they didn’t really feel comfortable writing in their own names. Some people think that’s such a terrible thing—‘journalistic integrity!’—that’s called growth hacking.”

Yoder says Chat Sports no longer runs fake bylines because it no longer needs to. “I wouldn’t do it at an established company,” he says, “but if I started another company… sure, absolutely, if we thought that it was beneficial. I think the founders of Airbnb, the founders of YouTube would say the same thing.”

And during the months in which Yoder met with VC firms, Yoder told O’Grady he had met with representatives for NBA star Stephen Curry, and that he was very close to getting Curry to invest in Chat Sports. (Yahoo Finance has seen those communications.) Yoder reiterates to Yahoo Finance, “I know Steph’s inner circle well.” But Curry’s agent Jeff Austin and Curry’s financial manager Frank Zecca both say they have never heard of James Yoder or Chat Sports.

If Yoder did fake an email from his best friend’s father Phillip Closius, and forged a term sheet from WI Harper, what was his endgame?

A writer closely associated with The Cauldron, who did not wish to be quoted by name, offers a theory: “He was out of options. He hadn’t gotten investment, he had Jamie [O’Grady] breathing down his neck, so he thought if he made it look like he got a bite, he’d buy himself some time. I don’t know what James is capable of at this point.”

Yoder laughs it all off: “‘Oh, Chat Sports, who’s been in business for 4-plus years, and has 30-plus investors, they’re making up term sheets.’ Why? Why would we do that?”

For what it’s worth, Yahoo Finance spoke with five different individuals who are private investors in Chat Sports, which Yoder says has raised $3 million to date. None of them are career investors; most are personal friends of Yoder. All spoke highly of Yoder and said they trust him, but none was willing to be quoted by name. They all work at large corporations and were concerned about potential negative reaction from their employers.

Sports Illustrated dumps The Cauldron

In late January, just days after everything between The Cauldron and Chat Sports fell apart, O’Grady received word from Sports Illustrated that they wanted to have a call. On that call, SI and Time Inc. executives told O’Grady that Time Inc. would be cutting ties with The Cauldron immediately.

The timing was suspicious to O’Grady, though he acknowledges that the partnership with SI had not been going anywhere for either party. Time Inc. demanded that The Cauldron remove all of Sports Illustrated’s marks and logos within 24 hours. But the phone call was not hostile.

A spokesperson for Time Inc. tells Yahoo Finance, “We routinely review all of our digital relationships, and as part of that process we decided to end the limiting licensing agreement we had with The Cauldron.”

But multiple sources at Time Inc. tell Yahoo Finance that the decision was prompted by an email that James Yoder sent around.

Chat Sports was also a digital partner of Time Inc., and it remains one at press time. Time Inc. announced the deal in September 2015, though a Time Inc. source tells Yahoo Finance that the partnership with Chat Sports is even smaller than the one with The Cauldron was.

According to Time Inc. sources who described the email, Yoder sent the email to a large list of Time Inc. executives and people in Time Inc.’s legal department, alerting them that The Cauldron was using its relationship with SI as a weapon and threatening a hit piece about Chat Sports that would run on SI.com. Yoder confirms he sent an email to people at Time Inc.

Once the email from Yoder came, Time Inc. brass apparently decided that since the relationship had waned anyway, it should cut all ties with The Cauldron rather than investigate the situation further. “Did Yoder act as the catalyst? Yes,” says a Time Inc. source. “But we were never going to fund The Cauldron anyway.”

Regardless of what Time Inc.’s true attitude was toward its ongoing relationship with The Cauldron, if Yoder’s email played any role in its decision to end the partnership (and sources say it did), then it would appear Time Inc. took Yoder’s claims at face value, and perhaps let the wrong partner go.

Sorting through the rubble

What are we left with?

Jamie O’Grady says he made a huge mistake getting into business with someone who proved untrustworthy; he points to a paper trail of documents, emails, text messages and Slack messages (all of which Yahoo Finance has seen) that he believes make it very clear he is the victim of a Stephen Glass-like fraud. “I don’t need to spin this,” he says. “The facts are what they are. I did nothing wrong.”

James Yoder, for his part, says that everything dishonest was perpetrated by O’Grady out of spite that the deal fell through.

Each man now says they are considering suing the other (and each claims tortious interference), though no lawsuits have been filed.

But this story is bigger than The Cauldron and Chat Sports, their two founders, Sports Illustrated, Time Inc., Medium, and even those mega sports stars. It’s a simple reminder that no matter how digital the business world becomes, there is still nothing more important than properly vetting a partner.

UPDATE, Feb. 24: Sports Illustrated and Time Inc have ended their partnership with Chat Sports.

—

Daniel Roberts is the sports business writer at Yahoo Finance.

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