A civil fraud complaint filed by the SEC alleges Allen and his business partner Susan Daub raised $32 million starting in 2012 with the promise that the money would be lent to professional athletes.
Allen and Daub made $18 million in loans but also improperly used $7 million for their own expenses, according to authorities. In addition, according to the SEC, Allen and Daub paid investors with funds that did not come through legitimate business income.
The complaint, which was filed last week in Boston and unsealed late Monday, says Allen and Daub “used money from some investors to pay other investors, while ... funneling millions of dollars of investor money to themselves — the hallmarks of a Ponzi scheme."
A Boston judge froze Allen's assets Monday.
Allen, 36, played 11 seasons in the NFL with the New York Giants, Miami Dolphins and New England Patriots after being selected in the first round of the 2001 NFL draft out of Syracuse by the Giants. He retired from football in 2012.
Daub, 54, is a financial professional who lives in Florida, according to the SEC.
"As in any Ponzi scheme, the appearance of a successful investment was only an illusion sustained by lies," Paul Levenson, director of the SEC's regional office in Boston, said in a statement.
The Associated Press contributed to this report.