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The sudden break-up between SI.com and one of its affiliates shows the ugly side of sports website acquisition

Cork Gaines
Sports Illustrated

(Slaven Vlasic/Getty Images for Sports Illustrated)
In early February, Sports Illustrated abruptly ended an affiliate arrangement with the sports website, The Cauldron, in a move that barely made a ripple, even inside the sport blog community. But a deep, behind-the-scenes look at the situation now paints an ugly picture of two SI.com affiliates involved in a sports website acquisition gone wrong, including allegations of back-stabbing, double-crossing, and even fraud.

Daniel Roberts of Yahoo Finance spoke to people at The Cauldron and Chat Sports — the two sites that were seemingly set to join forces, but instead ended up in an ugly war — and Sports Illustrated, the media giant behind the network to which The Cauldron and Chat Sports both belonged.

The Cauldron is a sports website that specializes in athlete-direct content, much like that of Derek Jeter's The Players' Tribune. It joined the Sports Illustrated network in 2015, in a typical arrangement common in the media world: The Cauldron got to put SI's logos on their website and occasionally had some of their content promoted at SI.com. In exchange, The Cauldron's traffic flowed through SI.com, meaning Sports Illustrated got credit for The Cauldron's traffic in the ratings wars.

According to Roberts, in early 2016, Jamie O’Grady, a Wall Street securities lawyer and owner of The Cauldron, sought outside investment in his website. He was introduced to James Yoder, the founder and CEO of Chat Sports, a Silicon Valley sports media site.

The Cauldron

(The Cauldron)
In July, 2016, Yahoo Finance says that Yoder agreed to buy The Cauldron for $1.8 million, with the deal contingent on Chat Sports being able to find investors for the new combined media venture. Neither side disputes this. But what comes next is a bunch of "he said, he said" allegations, and a deal that ends with no sale, threats of lawsuits from both sides, and SI dumping one of the sites, seemingly with the help of the other site.

Here are some of the uglier details and accusations from Yahoo Finance (in most cases, documents and emails were witnessed by Roberts):

  • Chat Sports agreed to pay O'Grady $20,000 up front, regardless of what happened, and another $30,000 if the deal fell through. The $20,000 was eventually paid in full, but not until after things had gone sour.
  • O'Grady says that Yoder suddenly became difficult to reach. Roberts spoke with owners of two other websites who told similar stories of receiving "generous" offers from Yoder and then suddenly having trouble getting in touch with him.
  • Yoder accused O'Grady of contacting potential investors directly after they had met with Yoder, to see if the investors wanted to invest directly in The Cauldron, as opposed to the two sites combined. According to Yahoo Finance, O'Grady "vigorously denies this."
  • In November, 2016, O'Grady says Yoder sent him an executed term sheet (a document with details on a potential investment) from a Chinese investor. According to that document, the Chinese firm agreed to invest $2 million in Chat Sports, contingent on $3 million being raised from other investors. When O'Grady sent the term sheet directly to the investor, they responded by saying it was "fraudulent" and told O'Grady "we appear to have both been victimized by this intentional act of defraudment."
  • O'Grady says he received a suspicious email from a Gmail account purporting to be from a law firm and looking to move forward with the deal. When O'Grady reached the lawyer through other forms of communication, the lawyer had no idea what O'Grady was talking about, but did acknowledge that Yoder is a family friend. Yoder confirmed that the lawyer's son is his best friend.
  • When asked about the email from the lawyer and the term sheet, Roberts says Yoder acknowledged their existence, but accused O'Grady of fabricating both.
  • After it was clear the deal was off, O'Grady reportedly sent Yoder a letter demanding $180,000 in damages. Yoder reportedly countered by sending O'Grady a letter demanding $10 million in damages. Both sides say they are considering suing the other.

Sports Illustrated's decision to cut ties with The Cauldron came "just days" after the deal with Chat Sports fell apart. SI told Yahoo Finance that ending the relationship was just part of a routine review they do with all their digital partnerships. However, several sources told Yahoo Finance that the divorce was pushed by an email from Yoder.

The email reportedly warned executives and the legal department at SI's parent company, Time Inc., that The Cauldron was about to run "a hit piece about Chat Sports" that would run on SI.com.

One source at Time told Roberts that they had already decided not to invest in The Cauldron, but that Yoder's email acted as a "catalyst" to terminating the relationship.

As of Thursday, Chat Sports remains part of the Sports Illustrated network.

2017 02 23_15 23 55

(Chat Sports)

Prior to the story in Yahoo Finance, Chat Sports wrote about the situation here.

When reached for comment, Yoder told Business Insider that the Yahoo Finance story was biased.

"Dan's story was written to help the cause of his close acquaintance at The Cauldron," said Yoder. "We offered to give Dan evidence to show the things he wrote were completely false, but he had no interest."

O'Grady told Business Insider that they plan to publish their side of the story at The Cauldron in the near future.

You can read the entire story at Yahoo Finance. It's a doozy.

Time did not immediately respond to a request for comment.

Correction: An earlier version of this report said that SI had decided to cut ties with The Cauldron before the email was received from Yoder. Rather, SI had reportedly only decided not to fund The Cauldron prior to the email.

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