SEC v. Ryan C. Drexler, No. 2:23-cv-05104, Central District of California (June 28, 2023) — Complaint

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ZACHARY T. CARLYLE (pro hac vice forthcoming)
[email protected]
SHARAN E. LIEBERMAN (pro hac vice forthcoming)
[email protected]
SECURITIES AND EXCHANGE COMMISSION
1961 Stout Street, Suite 1700
Denver, Colorado 80294-1961
Telephone:   (303) 844-1000
Facsimile:    (303) 297-3529
L
ocal Counsel:
DANIEL BLAU (Cal. Bar No. 305008)
[email protected]
SECURITIES AND EXCHANGE COMMISSION
444 S. Flower Street, Suite 900
Los Angeles, California 90071
Telephone:   (323) 965-3306
Facsimile:    (213) 443-1904
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
SECURITIES AND EXCHANGE
COMMISSION,
Plaintiff,
vs.
R
YAN C. DREXLER
Defendant.
Case No. 2:23-cv-05102
COMPLAINT AND JURY DEMAND
P
laintiff, United States Securities and Exchange Commission (the “SEC”), for
its Complaint against Ryan C. Drexler (“Drexler” or “Defendant”), alleges as
follows:
JURISDICTION AND VENUE
1.The Court has jurisdiction over this action pursuant to Sections 20(b),

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20(d), 20(e), and 22(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C.
§§ 77t(b), 77t(d), 77t(e), and 77v(a)] and Sections 21(d), 21(e), and 27(a) of the
Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d), 78u(e) and
78aa(a)].
2. Drexler, directly or indirectly, made use of the means or
instrumentalities of interstate commerce, or of the mails, or of the facilities of a
national securities exchange in connection with the acts, practices, transactions, and
co  urses of business set forth in this Complaint.
3. Venue lies in this Court pursuant to Section 22(a) of the Securities Act
[15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §78aa]. For the
majority of the time period relevant to this Complaint, Drexler resided in Beverly
Hills, California, and worked in the headquarters of MusclePharm, Corp.
(“MusclePharm”), in Burbank, California, and certain of the acts, practices,
transactions, and courses of business alleged in the Complaint occurred within this
District.
4. Drexler entered into a tolling agreement to toll the running of any statute
of limitations against him from July 8, 2022, through January 4, 2023. Drexler
entered into a second tolling agreement to toll the running of any statute of limitations
against him from January 5, 2023 through July 4, 2023.
SUMMARY
5. Drexler, during his tenure as Chairman, President, and Chief Executive
Officer (“CEO”) of MusclePharm, a publicly-traded nutritional supplement company,
engaged in a scheme to defraud MusclePharm’s investors about the strength of the
company’s controls over financial reporting and disclosures and the devastating
impact of MusclePharm’s debt default in the third quarter of 2022. His conduct also
ran afoul of critical rules regarding the processes, controls, and procedures that public
companies, like MusclePharm, must have in place to provide assurance that their
accounting and public reports are accurate.

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6. Drexler’s fraudulent and deceptive conduct manifested itself in two
specific ways. First, Drexler failed to ensure that, and made false statements about
whether, MusclePharm had basic processes, controls, and procedures in place to
ensure that its accounting for revenue, profit, and other important financial metrics –
all of which was reported to and relied on by investors – was correct.
7. Drexler was responsible for maintaining appropriate internal control
over financial reporting (“ICFR”) and disclosure controls and procedures (“DCP”) at
MusclePharm. Under SEC rules, public companies, such as MusclePharm, are
required to maintain ICFR and DCP, which include processes designed to provide
reasonable assurance that their financial reporting complies with generally accepted
accounting principles (“GAAP”) and controls designed to ensure that information is
disclosed pursuant to SEC requirements. Drexler failed to ensure that MusclePharm
maintained appropriate ICFR and DCP and made false and misleading statements
about both.
8. In every annual and quarterly report that Drexler signed and certified on
behalf of MusclePharm between at least year-end 2017 and the third quarter of 2018,
Drexler certified that he had evaluated MusclePharm’s ICFR and DCP. In fact, he
had not performed any evaluation.
9. Drexler’s failure to ensure that MusclePharm maintained ICFR and DCP
contributed to MusclePharm reporting inaccurate financial statements for at least the
year-end 2017 through the third quarter of 2018.
10. Second, in the third quarter of 2022, Drexler engaged in deceptive
conduct and made misleading statements by hiding from investors that a $10 million
debt to MusclePharm creditors had been automatically accelerated and was presently
due, resulting in immediate and catastrophic consequences for the company and its
investors.
11. In addition to his fraudulent and deceptive conduct, Drexler also violated
critical provisions of the securities laws by directing MusclePharm not to report

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exceptional turnover in a key financial position, and engaging in conduct that led to
MusclePharm underreporting certain perquisite compensation that executives at the
company received.
12. Finally, Drexler did not reimburse MusclePharm for cash bonuses that
he received after filing financial statements that were later restated due to
misconduct, as required by the Sarbanes-Oxley Act of 2002 (“SOX”).
13. By engaging in this conduct, Drexler is liable, and unless enjoined, is
likely to continue to: violate or aid and abet violations of Section 17(a) of the
Securities Act [15 U.S.C. §§ 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. §
78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; violate Section 14(a) of
the Exchange Act [15 U.S.C. § 78n(a)] and Rules 13a-14, 13a-15(b), 13a-15(c), 14a-
3, and 14a-9 thereunder [17 C.F.R. §§ 240.13a-14, 240.13a-15(b), 240.13a-15(c),
240.14a-3, and 240.14a-9]; and aid and abet violations of Sections 13(a) and
13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(a) and 78m(b)(2)(B)] and Rules
12b-20, 13a-1, 13a-11, 13a-13, and 13a-15(a) thereunder [17 C.F.R. §§ 240.12b-20,
240.13a-1, 240.13a-11, 240.13a-13, and 13a-15(a)]. Drexler also violated and, unless
ordered to comply, is likely to continue to violate, Section 304(a) of SOX [15 U.S.C.
§ 7243(a)].
DEFENDANT
14. Ryan C. Drexler, 52, currently resides in Las Vegas, Nevada. Until
approximately April 2021, Drexler resided in Beverly Hills, California. Drexler was
the Chairman of MusclePharm’s board of directors from approximately June 2015 to
December 2022. He also served as MusclePharm’s CEO from approximately March
2016 to December 2022 and as MusclePharm’s principal accounting officer (“PAO”)
and principal financial officer (“PFO”) from approximately September 2017 to April
2020. Drexler is also MusclePharm’s largest lender and shareholder. From 2015
through 2022, Drexler executed multiple notes to loan MusclePharm more than $28
million; certain of those notes were converted to common stock; and he still holds

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secured notes totaling approximately $10 million.
OTHER RELEVANT ENTITY
15. MusclePharm Corp., is a Nevada corporation that develops, markets,
and distributes branded nutritional supplements. Its current principal place of
business is in Las Vegas, Nevada, but it was headquartered in Burbank, California
from approximately December 2017 until August 2021. MusclePharm’s securities are
registered pursuant to Section 12(g) of the Exchange Act and traded on the OTC
Link, operated by OTC Markets Group Inc., under the symbol “MSLP” or “MSLPQ.”
In 2015, MusclePharm settled claims brought by the SEC for violations of Sections
5(a), 5(c), 17(a)(2), and 17(a)(3) of the Securities Act; Sections 13(a), 13(b)(2)(A),
13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13,
and 14a-9 thereunder; and Rule 302 of Regulation S-T of the Exchange Act (the
“2015 SEC Order”). MusclePharm filed for Chapter 11 bankruptcy protection in the
U.S. Bankruptcy Court for the District of Nevada on December 15, 2022.
FACTS
I. BACKGROUND AND FINANCIAL RESTATEMENT.
16. In August 2015, MusclePharm announced a restructuring plan focused
on reducing costs and reallocating the company’s resources for profitable growth. In
its Form 10-K filed on April 2, 2018, MusclePharm announced that this restructuring
plan was substantially complete.
17. During the earnings call for the fourth quarter of 2017, Drexler
highlighted the completion of the restructuring program and proclaimed that the
company was now on a path to consistent profitable growth.
18. In order to achieve consistent growth, Drexler pushed MusclePharm’s
sales team to meet unrealistic quarterly sales targets, and threatened to, and did, fire
employees who challenged him or failed to achieve the targets.
19. In this environment, MusclePharm reported quarter over quarter revenue
growth from the fourth quarter of 2017 through the third quarter of 2018. Drexler

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highlighted this achievement in each of the Company’s press releases and earnings
calls during that period.
20. MusclePharm reported its financial results for these periods in its Form
10-K for 2017 and Forms 10-Q for the first three quarters of 2018, which Drexler
signed and certified as MusclePharm’s CEO, President, Chairman of the Board of
Directors, Principal Executive Officer (“PEO”), PFO, and PAO.
21. During its 2018 audit work, the company’s external auditor detected that
MusclePharm had recognized revenue at the end of the fourth quarter of 2018 that it
should have recorded in later periods because certain inventory had been temporarily
stored off-site in trailers rather than being shipped to MusclePharm’s customers prior
to year-end.
22. The company opened an internal investigation to identify the scope and
cause of the errors. The internal investigation uncovered similar errors with
unshipped orders impacting the third quarter of 2018, and the company filed a Form
8-K on March 14, 2019, announcing that its previously reported financial statements
for the three and nine months ended September 30, 2018, should no longer be relied
upon. In April 2019, the company announced on Form NT 10-K that it would be
unable to timely file its 2018 annual report, and in May 2019, the company’s external
auditor resigned without completing the 2018 audit work.
23. More than a year later, on August 25, 2020, MusclePharm filed a Form
10-K that restated its financial statements for year-end 2017 and the first three
quarters of 2018 (the “Restatement Period”) and included the overdue financial
statements for 2018 and 2019.
24. The restatement disclosed that, during the Restatement Period,
MusclePharm inflated its previously reported quarterly revenues by 9 to 25 percent
and materially misstated various other aspects of its financial statements.
25. MusclePharm disclosed in its August 25, 2020 Form 10-Q that its
management concluded that MusclePharm had numerous material weaknesses in its

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internal control over financial reporting and that its disclosure controls and
procedures were not effective.
26. Drexler signed and certified MusclePharm’s August 25, 2020 Form 10-
K as MusclePharm’s CEO, President, Chairman of the Board of Directors, and PEO.
27. The Form 10-K filed on August 25, 2020, included a plan to remediate
these material weaknesses, but MusclePharm did not correct the material weaknesses.
28.  According to its most recent quarterly report, filed on Form 10-Q on
May 16, 2022, MusclePharm again disclosed material weaknesses in the design and
operation of virtually all aspects of its internal controls. Specifically, MusclePharm
disclosed that:
“The Company has deficiencies in the design and operation of its internal
controls in the financial processes related to the accounting for cash, accounts
receivable, accounts payable, inventory, accrued liabilities, income taxes, debt,
equity, revenue, costs of sales, stock-based compensation, and expenses
classification. In addition, the Company has insufficient controls over the
financial close and reporting process, including account reconciliations and
preparation and review of financial statements and related disclosures.”
29. On August 17, 2022, MusclePharm announced on Form NT 10-Q that it
would not be able to timely file its quarterly report for the second quarter of 2022.
Shortly thereafter, on August 22, 2022, MusclePharm announced in a Form 8-K,
signed by Drexler, that its financial statements for the year ended December 31, 2021,
and quarter ended March 31, 2022, should no longer be relied upon because they
reflected errors resulting in material overstatements to reported revenues.
30. MusclePharm still has not completed the work necessary to restate its
2021 and first quarter 2022 financial statements.
II. DREXLER FAILED TO ENSURE THAT MUSCLEPHARM
MAINTAINED APPROPRIATE ICFR AND DCP.
31. Exchange Act Rule 13a-15(a) requires issuers like MusclePharm to

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maintain ICFR and DCP.
32. ICFR is defined in Exchange Act Rule 13a-15(f) in part as “a process
designed by, or under the supervision of, the issuer’s principal executive and
principal financial officers, ... to provide reasonable assurance regarding the
reliability of financial reporting and preparation of financial statements for external
purposes in accordance with generally accepted accounting principles ....”
33. DCP are defined in Exchange Act Rule 13a-15(e) in part as “controls
and other procedures of an issuer that are designed to ensure that information
required to be disclosed by the issuer ... is recorded, processed, summarized, and
reported, within the time periods specified in the [SEC’s] rules and forms.”
34. ICFR and DCP are the responsibility of a company’s PEO and PFO.
Throughout the Restatement Period, Drexler was MusclePharm’s PEO and PFO. In
those roles, Drexler was responsible for ensuring that MusclePharm maintained
appropriate ICFR and DCP.
35. Drexler confirmed this responsibility in each and every quarterly and
annual report on Forms 10-Q and 10-K he signed on behalf of MusclePharm during
the Restatement Period. The quarterly and annual reports Drexler signed on behalf of
MusclePharm during the Restatement Period are comprised of MusclePharm’s 2017
Form 10-K filed on April 2, 2018; first quarter 2018 Form 10-Q filed on May 15,
2018; second quarter 2018 Form 10-Q filed on August 14, 2018; and third quarter
2018 Form 10-Q filed on November 14, 2018.
36. Each one of those filings included a SOX 302 certification, signed by
Drexler as MusclePharm’s PEO and PFO, which stated that Drexler:
a.   was “responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-
15(e) ...) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) ...) for [MusclePharm]”;
b. “[d]esigned such disclosure controls and procedures, or caused

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such disclosure controls and procedures to be designed under [his]
supervision”; and
c.   “[d]esigned such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under [his] supervision.”
37. Drexler similarly confirmed his responsibilities for ensuring that
MusclePharm maintain ICFR in letters to MusclePharm’s external auditor that he
signed (“Management Representation Letters”). For example:
a.   on April 2, 2018, Drexler signed a Management Representation
Letter in connection with the audit for the year ended December
31, 2017, that asserted that Drexler was “responsible for the fair
presentation in the financial statements of financial position,
results of operations, and cash flows in conformity with
accounting principles generally accepted in the United States” and
for “adopting sound accounting policies, establishing and
maintaining internal control, and preventing and detecting fraud”;
b. on May 15, 2018 and August 14, 2018, Drexler signed
Management Representation Letters in connection with the
reviews of MusclePharm’s financial statements for the quarters
ended March 31, 2018 and June 30, 2018 that asserted that
Drexler was “responsible for the fair presentation of the financial
statements in conformity with accounting principles generally
accepted in the United States of America” and “for establishing
and maintaining effective internal control over financial
reporting”; and
c.   on November 13, 2018, Drexler signed a Management
Representation Letter in connection with the review of
MusclePharm’s financial statements as of September 30, 2018 that

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asserted that he was “responsible for the fair presentation ... of
financial position, results of operations, and cash flows in
conformity with accounting principles generally accepted in the
United States of America” and “for the design and implementation
of programs and controls to prevent and detect fraud.”
38. Despite the assertions made in each of the SOX 302 certifications and
Management Representation Letters, Drexler failed to ensure that MusclePharm
maintained appropriate ICFR and DCP. Indeed, Drexler never read MusclePharm’s
ICFR and was not aware of whether MusclePharm had any documented DCP at all.
39. Further, when the company’s external auditor resigned in May 2019, it
noted that during the 2018 fiscal year “the internal controls necessary for the
Company to develop reliable financial statements do not exist.”
III. DREXLER MADE MATERIALLY FALSE AND MISLEADING
STATEMENTS REGARDING HIS EVALUATION OF ICFR AND DCP
DURING THE RESTATEMENT PERIOD.
40. Drexler was MusclePharm’s PEO and PFO when he signed each of
MusclePharm’s quarterly reports on Form 10-Q and its annual report on Form 10-K,
as well as SOX 302 certifications for each filing, during the Restatement Period.
41. With respect to ICFR, in each and every SOX 302 certification that
Drexler signed as MusclePharm’s PEO and PFO during the Restatement Period, he
affirmed that he “disclosed, based on [his] most recent evaluation of internal control
over financial reporting” all significant deficiencies, material weaknesses, and fraud.
(Emphasis added).
42. With respect to DCP, in each and every annual and quarterly report that
Drexler signed as MusclePharm’s PEO and PFO during the Restatement Period, he
also affirmed that he “evaluated the effectiveness of [MusclePharm’s] disclosure
controls and procedures (as defined in Rules 13a-15(e) ...), as of the end of the
period” and “[b]ased on such evaluation, [he] has concluded that ... [MusclePharm’s]

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disclosure controls and procedures are designed at a reasonable assurance level and
are effective to provide reasonable assurance that information [the company is]
required to disclose in reports that [it] file[s] or submit[s] under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in
the rules and forms of the [SEC], and that such information is accumulated and
communicated to [MusclePharm’s] management, including [Drexler], as appropriate,
to allow timely decisions regarding required disclosure.”
43. Additionally, in each and every SOX 302 certification that Drexler
signed as MusclePharm’s PEO and PFO during the Restatement Period, he affirmed
that he “[e]valuated the effectiveness of [MusclePharm’s] disclosure controls and
procedures.”
44. A reasonable investor would have understood from these statements that
Drexler had evaluated MusclePharm’s ICFR and DCP for each reporting period
during the Restatement Period, that any significant deficiencies or material
weaknesses in ICFR based on his evaluation were identified, and that Drexler had
concluded that DCP was designed and effective at a reasonable assurance level based
on his evaluation.
45. In reality, Drexler did not perform an evaluation of MusclePharm’s
ICFR or DCP during the Restatement Period. Moreover, no one under his direction
performed an evaluation of MusclePharm’s ICFR or DCP. MusclePharm did not have
a sub-certification process in place for testing ICFR and Drexler did not see results
from any assessment of ICFR. Moreover, Drexler was unaware of whether
MusclePharm had any documented DCP.
46. Each of the above statements regarding Drexler’s evaluation of
MusclePharm’s ICFR and DCP was false when made, and Drexler knew or was
reckless in not knowing, and should have known, that his statements regarding his
evaluation of MusclePharm’s ICFR and DCP were false and misleading. Drexler,
when making statements regarding his evaluation of ICFR and DCP, knew that he

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had not performed an evaluation of MusclePharm’s ICFR or DCP during the
Restatement Period, and had not seen results of any other assessment of ICFR or
DCP.
47. The above misrepresentations regarding Drexler’s evaluation of
MusclePharm’s ICFR and DCP were material because, among other things, investors
and potential investors would consider Drexler’s statements regarding his evaluation
of MusclePharm’s ICFR and DCP important when assessing whether MusclePharm’s
reported financial results were accurate.
IV. DREXLER OBTAINED MONEY FOR MUSCLEPHARM BY
MEANS OF THESE FALSE AND MISLEADING STATEMENTS.
48. Drexler obtained money for MusclePharm by means of the
misstatements regarding his evaluation of MusclePharm’s ICFR and DCP because,
from at least June 2018 to May 2019, through private placements, MusclePharm sold
(i) restricted stock to board members to pay for board fees, (ii) common stock to
plaintiffs engaged in civil litigation with the company to pay for litigation
settlements, and (iii) common stock to vendors to pay for invoices. As the CEO and
Chairman of the Board of Directors, Drexler voted to approve these private
placement sales and was involved in implementing the sales by, for example, signing
letters to the stock transfer services company directing them to issue the shares and
send stock certificates to the applicable parties.
V. DREXLER’S FAILURE TO ENSURE THAT MUSCLEPHARM
MAINTAINED ICFR LED TO MATERIALLY FALSE FINANCIAL
STATEMENTS.
49. In the Form 10-K filed on August 25, 2020, MusclePharm restated its
financial statements for the Restatement Period. The restatement disclosed that,
during the Restatement Period, MusclePharm inflated its previously reported
quarterly revenues by 9 to 25 percent, overstated its gross margins by 22 to 49
percent, understated its customer credits by 23 to 38 percent, understated its inventory

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by 23 to 34 percent, and overstated its advertising and promotional expenses by 284
to 594 percent.
50. These errors were caused, in part, by Drexler’s failure to implement and
maintain ICFR for MusclePharm and the resulting material weaknesses in
MusclePharm’s internal controls.
51. MusclePharm disclosed in its August 25, 2020 Form 10-K that its
management concluded that eleven “material weaknesses” existed throughout the
Restatement Period. The filing states that a material weakness is “a deficiency, or a
combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of ... annual or interim
financial statements will not be prevented or detected on a timely basis.” The material
weaknesses identified by MusclePharm’s management included:
a.   “Pressure to achieve sales targets gave rise to the premature and/or
inappropriate recognition of revenues, typically occurring at or
near the end of financial reporting periods”;
b. “The Company’s internal controls failed and/or were not adequate
to ensure that there was effective testing of period end sales
cutoff, including a proper review and comparison of invoice dates
and related proof of delivery”;
c.   “Inadequate segregation of duties, allowing for an improper
alignment of sales and operations under common leadership”;
d. “Management did not maintain an effective control environment,
including ensuring that required accounting methodologies,
policies, and technical accounting personnel were in place. This
control deficiency led to a series of corrections related to the years
2018 and 2017 and resulted in a restatement to the respective
previously issued financial statements”;
e.   “The Company did not properly classify payments to customers,

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primarily for promotional activity, as a reduction in the transaction
price with its customers, instead treating such payments as an
advertising and promotions activity, a component of operating
expense”;
f. “The Company reported certain sales transactions prior to transfer
of control of goods, inconsistent with customer sales agreements
and the Company’s customary practices”;
g. “The Company did not properly estimate the expected value of
customer payments, in the form of credits, at each quarter period
end in 2018. In addition, the Company understated its accrual for
customers credits for the year ended December 31, 2017”; and
h. “The Company lacks the proper internal control documentation
and testing, and therefore internal controls were not consistently
performed.”
52. Drexler signed and certified MusclePharm’s August 25, 2020 Form 10-
K as MusclePharm’s CEO, President, Chairman of the Board of Directors, and PEO.
VI. DREXLER MADE MATERIALLY MISLEADING STATEMENTS
ABOUT MUSCLEPHARM’S DEBT.
53. In October 2021 and June 2022, MusclePharm raised over $10 million
from a group of institutional investors (the “Noteholders”) through the sale of notes
and warrants (the “Notes”).
54. In August and September 2022, the Noteholders sent letters to the
company reserving their rights under the Notes because MusclePharm engaged in
conduct that caused two events of default. Specifically, the Noteholders stated that
MusclePharm had: (i) provided materially untrue or incorrect financial statements as
evidenced by the company’s August 22, 2022 announcement that its 2021 and first
quarter 2022 financial statements should no longer be relied upon; and (ii) not
replaced the resigning CFO with a new CFO who was not objectionable to the

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Noteholders.
55. Drexler signed a MusclePharm Form 8-K dated September 19, 2022,
disclosing the receipt of these letters, but also assuring investors that “the
Noteholders have not accelerated payment of the outstanding balances under the
Notes and have not informed the Company that the Noteholders intend to accelerate
payment of the outstanding balances under the Notes.”
56. A reasonable investor would have understood from this disclosure that
MusclePharm’s debt under the Notes had not been accelerated.
57. The Form 8-K omitted the fact that the Notes included a “right o[f]
automatic acceleration,” which provided that “the Holder need not provide, and the
Company hereby waives, any presentment, demand, protest or other notice [of
acceleration] of any kind.” As such, MusclePharm’s debt was automatically
accelerated at the time the event of default occurred, which had an immediate impact
on the company’s liquidity and triggered its obligation to disclose an acceleration of
direct financial obligations under Item 2.04 of Form 8-K.
58. The September 19, 2022 Form 8-K was misleading because it indicated
that the company would not suffer any meaningful negative repercussions as a result
of the events of default unless and until it received a payment demand from the
Noteholders. In fact, the event of default had an immediate negative impact on
MusclePharm’s liquidity.
59. Drexler’s misleading statement about the acceleration of the company’s
debt was material to reasonable investors because the status of the debt was central to
the company’s ability to continue normal business operations and maintain control
over its assets.
60. On September 22, 2022, just three days after MusclePharm filed the
Form 8-K, the Noteholders sent a payment demand letter to Drexler stating that the
outstanding balances under the Notes were “immediately due and payable” and that
“the Notes have been accruing, and will continue to accrue, Default Interest.”

COMPLAINT
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61. Thereafter, the Noteholders exercised their rights under the Notes to
secure payment of the debt by sweeping the company’s bank accounts in
approximately October 2022, causing MusclePharm to cease all normal business
operations, and placing the company’s assets up for auction in approximately
November 2022, forcing MusclePharm to seek bankruptcy protection to halt the asset
sale.
62. Drexler knew or was reckless in not knowing, and should have known,
that his statement regarding the acceleration of the company’s debt was misleading.
The September 19, 2022 Form 8-K included direct quotes from the acceleration
provision of the Notes but omitted language from the very same paragraph describing
the right of automatic acceleration. This selective citation to the acceleration
provision shows that Drexler knew or was reckless in not knowing, and should have
known, that the Notes automatically accelerated without notice. Drexler also knew or
was reckless in not knowing, and should have known, that acceleration of the Notes
would cause immediate and devastating consequences for the company. And, in fact,
these consequences came to light just three days later when the Noteholders sent a
payment demand, which ultimately resulted in the Noteholders sweeping the
company’s bank accounts and placing its assets up for auction in an effort to secure
payment of the Notes.
VII.   DREXLER ENGAGED IN FRAUDULENT OR DECEITFUL
CONDUCT.
63. As detailed above, Drexler engaged in deceptive conduct regarding the
evaluation of MusclePharm’s ICFR and DCP, as well as the status of the company’s
debt. Among other things, Drexler:
a.   did not evaluate the effectiveness of the company’s ICFR and
DCP, despite the requirements to do so in Exchange Act Rules
13a-15(b) and (c);
b. signed SOX 302 certifications during the Restatement Period

COMPLAINT
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attesting to the fact that he evaluated MusclePharm’s ICFR and
DCP when he had not performed any evaluation of the company’s
ICFR or DCP;
c.   signed each annual and quarterly report during the Restatement
Period attesting to the fact that he evaluated MusclePharm’s DCP
and concluded that they were effective when he had not performed
any evaluation of the DCP; and
d. withheld information from investors about the Notes’ right of
automatic acceleration and the immediate and catastrophic impact
it would have on the company and its investors.
64. Drexler knew or was reckless in not knowing, and should have known,
of his deceptive conduct. Drexler knew or was reckless in not knowing, and should
have known, that he had not performed an evaluation of MusclePharm’s ICFR or
DCP. And Drexler knew or was reckless in not knowing, and should have known,
that the Notes automatically accelerated without notice and that acceleration of the
Notes would cause immediate and devastating consequences for the company.
VIII.  DREXLER AIDED AND ABETTED MUSCLEPHARM’S FRAUD.
65. MusclePharm, through Drexler, engaged in deceptive conduct and made
material false and misleading statements by failing to properly evaluate its ICFR and
DCP during the Restatement Period and making material misstatements about those
evaluations in its Form 10-K and Forms 10-Q. MusclePharm also engaged in
deceptive conduct and made material misleading statements by withholding
information from investors regarding the acceleration of the company’s debt and
making misleading statements about the status of the company’s debt in its
September 19, 2022 Form 8-K.
66. MusclePharm, through Drexler, knew or was reckless in not knowing,
and should have known, that its conduct was deceptive and that its statements were
false and misleading.

COMPLAINT
18

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67. For the reasons detailed above, Drexler knowingly or recklessly
substantially assisted MusclePharm’s deceptive conduct and misstatements. Among
other things, Drexler (i) acting as MusclePharm’s PEO and PFO, did not evaluate the
effectiveness of the company’s ICFR and DCP, (ii) signed SEC filings on behalf of
MusclePharm that contained material misstatements regarding his evaluations of
MusclePharm’s ICFR and DCP, (iii) withheld information from MusclePharm
investors regarding the acceleration of MusclePharm’s debt, and (iv) signed the
September 19, 2022 Form 8-K on behalf of MusclePharm that contained material
misleading statements regarding the status of MusclePharm’s debt.
IX. DREXLER’S FAILURE TO ENSURE THAT MUSCLEPHARM
MAINTAINED DCP LED TO UNDERREPORTED PERQUISITES AND
VIOLATIONS OF THE PROXY SOLICITATION PROVISIONS OF
THE FEDERAL SECURITIES LAWS.
68. Accurate disclosure of executive perquisites was the primary focus of
the 2015 SEC Order. Pursuant to the 2015 SEC Order, MusclePharm engaged an
independent compliance consultant (“ICC”) to, among other things, strengthen the
disclosure controls and procedures relevant to accurate disclosure of perquisite
compensation.
69. In February 2017, the company certified to the SEC that it had complied
with the undertakings in the 2015 SEC Order, in part, by implementing a disclosure
control recommended by the ICC to use an “[a]nnual questionnaire[] ... provided to
the members of the Board of Directors and executives to identify any perquisites.”
(“D&O questionnaire”).
70. MusclePharm used a D&O questionnaire in early 2017 to identify 2016
perquisites. But, the very next year, after Drexler took over the PFO and PAO roles in
the third quarter of 2017, neither he nor anyone else at the company used a D&O
questionnaire, or any other controls, to identify 2017 perquisites for its named
executive officers: Drexler and the Executive Vice President of Sales.

COMPLAINT
19

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71. MusclePharm’s Travel and Expense Policy outlined the procedures for
obtaining reimbursement for business expenses, including specifically identifying the
business purpose of the expense and submitting original receipts.
72. During 2017, Drexler disregarded these procedures by seeking
reimbursement for expenses that were not supported by any business purpose or
appropriate documentation.
73. Drexler obtained reimbursement for significant commuting expenses and
other expenses not integrally and directly related to his job that should have been
classified as perquisites.
74. Based on this conduct, Drexler received undisclosed perquisites in 2017
comprised of approximately $129,200 in personal legal fees, $66,200 of tax gross-ups
on restricted stock, $22,800 in commuting and living expenses, $8,300 in furniture
expenses, and $4,500 of other personal expenses.
75. As a result of the conduct described above, MusclePharm materially
underreported executive perquisites in its 2017 Form 10-K, which was signed by
Drexler, by approximately $231,000 (88 percent) for Drexler and approximately
$107,900 (54 percent) for the Executive Vice President of Sales.
76. MusclePharm filed a definitive proxy statement on October 26, 2018,
that it used to solicit proxies in connection with, among other things, the re-election
of Drexler to the board of directors and an advisory vote on the executive
compensation packages for Drexler and other executive officers.
77. Drexler, as a director of the company, participated in the solicitation.
78. Section 14(a) of the Exchange Act makes it unlawful to solicit any proxy
with respect to any security (other than an exempted security) registered pursuant to
Section 12 of the Exchange Act in contravention of such rules and regulations as the
SEC may prescribe. Rule 14a-3 provides that no solicitation of a proxy may occur
unless each person solicited is concurrently furnished or has previously been
furnished with a proxy statement containing the information specified by Schedule

COMPLAINT
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14A, including executive compensation. Rule 14a-9 prohibits the use of proxy
statements containing statements that are materially false or misleading by omission.
79. The proxy statement reported the same executive perquisites as those
reported in MusclePharm’s 2017 Form 10-K executive compensation disclosures. As
a result of Drexler’s conduct in connection with the disclosures described above,
MusclePharm materially underreported executive perquisites in the October 26, 2018
proxy statement by approximately $231,000 (88 percent) for Drexler and
approximately $107,900 (54 percent) for the Executive Vice President of Sales.
80. Accurate and transparent executive compensation disclosures are
material because the amounts that executives are paid, as well as the amounts
executives are paid as perquisites, are important to an investor’s assessment of a
company’s likely future profitability and the alignment of management’s interests
with the interests of shareholders.
81. Drexler should have known that the perquisite disclosures in the proxy
statement were materially misstated because, among other reasons, he had knowledge
of the unreported perquisites he received and he failed to exercise reasonable care
with respect to DCP involving executive compensation.
X. DREXLER DIRECTED MUSCLEPHARM NOT TO FILE REQUIRED
CURRENT REPORTS ON FORM 8-K REGARDING
MUSCLEPHARM’S PAO.
82. MusclePharm experienced exceptional, undisclosed turnover in the PAO
position in the third quarter of 2017. In fact, in just a single quarter, three different
people held the position of PAO at MusclePharm. In July 2017, the interim
CFO/PAO resigned and was replaced by a new CFO/PAO in August 2017, but he
resigned the following month. Whereupon Drexler was appointed as the interim PAO
in September 2017.
83. Issuers are required to disclose all changes to the PAO position on Item
5.02 of Form 8-K within four business days of the event.

COMPLAINT
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84. None of the third quarter 2017 changes were timely disclosed.
85. In August and September 2017, Drexler received and reviewed draft
Forms 8-K related to one PAO’s resignation, but he instructed the company’s
controller not to file the disclosure.
86. Instead, MusclePharm waited until November 14, 2017, to file a Form 8-
K, which Drexler signed, that belatedly disclosed all the changes that occurred in the
PAO position in the prior quarter.
XI.     DREXLER FAILED TO REIMBURSE MUSCLEPHARM FOR
BONUSES RECEIVED IN THE 12 MONTHS FOLLOWING
MISSTATED REPORTS.
87. SOX Section 304(a) requires the CEO and CFO of any issuer required to
prepare an accounting restatement due to material non-compliance with financial
reporting requirements under the securities laws as a result of misconduct to
reimburse the issuer for (i) any bonus or other incentive or equity based
compensation received by that person from the issuer during the twelve-month period
following the first public issuance or filing with the SEC of the misstated document,
and (ii) any profits realized from the sale of securities of the issuer during that
twelve-month period.
88. MusclePharm was required to restate its financial statements contained
in its Form 10-K for the year ended December 31, 2017, and its Forms 10-Q for the
quarters ended March 31, 2018, June 30, 2018, and September 30, 2018, because, as
a result of misconduct, its financial statements did not comport with GAAP.
89. MusclePharm’s restatements for those periods were disclosed in its Form
10-K filed with the SEC on August 25, 2020.
90. Drexler received bonuses in the 12-month period following the first
public issuance or filing with the SEC of the misstated Form 10-K for the year ended
December 31, 2017, and one or more of the misstated Forms 10-Q, including a
$100,000 cash bonus paid on May 31, 2018, and a $250,000 cash bonus paid on

COMPLAINT
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August 15, 2018.
91. Drexler has not reimbursed any bonus amount to MusclePharm.
XII.   DREXLER VIOLATED, OR AIDED AND ABETTED
MUSCLEPHARM’S VIOLATIONS OF, REPORTING,
CERTIFICATION, REPORTING CONTROLS, AND INTERNAL
CONTROLS PROVISIONS OF THE FEDERAL SECURITIES LAWS.
A. Drexler Aided and Abetted MusclePharm’s Violation of Reporting
Provisions of the Federal Securities Laws.
92. Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11, and 13a-13
thereunder require issuers like MusclePharm to file reports with the SEC containing
such information as the SEC’s rules prescribe. Further, Exchange Act Rule 12b-20
requires that an issuer’s statement or report contain such further material information
as may be necessary to make the required statements, in light of the circumstances
under which they were made, not misleading.
93. As detailed above, MusclePharm violated these reporting provisions by
(i) filing annual and quarterly reports with the SEC that misstated Drexler’s
evaluation of the company’s ICFR and DCP, (ii) filing a current report on September
19, 2022, that contained misleading statements about the Notes acceleration as
described above, and (iii) failing to file required current reports regarding PAO
turnover.
94. Also as detailed above, Drexler aided and abetted these violations by
knowingly or recklessly providing substantial assistance to MusclePharm’s
violations. Among other things, Drexler (i) signed and certified each of the annual
and quarterly reports that included false and misleading information about his own
conduct, (ii) signed the misleading September 19, 2022 current report on Form 8-K,
and (iii) directed the company not to timely file a current report regarding the
departure of one of the PAOs in third quarter 2017.

COMPLAINT
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B. Drexler Violated the Certification Provision of the Federal
Securities Laws.
95. Rule 13a-14 of the Exchange Act requires, in pertinent part, that each
annual and quarterly report include certifications signed by the issuer’s PEO and PFO
which include representations that (i) based on the certifier’s knowledge, the report
does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by the
report and (ii) the certifier designed and evaluated the effectiveness of the registrant’s
ICFR and DCP.
96. Drexler violated Rule 13a-14 by certifying MusclePharm’s annual and
quarterly reports during the Restatement Period because (i) he signed the certification
without a sufficient basis to believe the certifications were accurate and (ii) he knew
that the reports included material misstatements or omissions regarding his design
and evaluation of ICFR and DCP.
C. Drexler Violated and Aided and Abetted MusclePharm’s Violations
of the Reporting Controls Provision of the Federal Securities Laws.
97. Rule 13a-15(a) of the Exchange Act requires issuers like MusclePharm
to maintain DCP and ICFR.
98. MusclePharm violated Rule 13a-15(a) by failing to maintain DCP or
ICFR as required. Specifically, MusclePharm failed to implement DCP concerning
the identification and reporting of executive perquisites, and failed to maintain
appropriate ICFR to prevent and detect accounting errors during the Restatement
Period.
99. Drexler knowingly or recklessly substantially assisted MusclePharm’s
violation of Rule 13a-15(a). For example, although the company certified to the SEC
staff in February 2017 that it implemented a D&O questionnaire disclosure control,
Drexler failed to use D&O questionnaires, or any other controls, to identify 2017

COMPLAINT
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perquisites that he and the Executive Vice President of sales received. Additionally,
as set forth above, Drexler failed to ensure that MusclePharm maintained appropriate
ICFR and DCP.
100.   Drexler additionally violated Rules 13a-15(b) and 13a-15(c) of the
Exchange Act by failing to evaluate the company’s ICFR and DCP, as required by
those provisions.
D. Drexler Aided and Abetted MusclePharm’s Violation of the Internal
Controls Provision of the Federal Securities Laws.
101.   Section 13(b)(2)(B) of the Exchange Act requires issuers like
MusclePharm to devise and maintain a system of sufficient internal accounting
controls.
102.   In violation of Section 13(b)(2)(B), MusclePharm failed to maintain a
system of internal accounting controls sufficient to provide reasonable assurance that
revenue, customer credits, gross profit margin, advertising and promotional expenses,
and inventory complied with GAAP.
103.   In his role as PEO, PFO, and PAO, Drexler was responsible for devising
and maintaining MusclePharm’s system of internal accounting controls and, by
failing to do so, Drexler knowingly or recklessly substantially assisted
MusclePharm’s violation of Section 13(b)(2)(B) of the Exchange Act.
FIRST CLAIM FOR RELIEF
Fraud: Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
104.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
105.   Drexler, directly or indirectly, acting with scienter, by use of the means
or instrumentalities of interstate commerce, or of the mails, or of a facility of a
national securities exchange, in connection with the purchase or sale of a security
(i)  employed devices, schemes, or artifices to defraud, (ii) made untrue statements of
material fact or omitted to state a material fact necessary in light of the circumstances

COMPLAINT
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under which they were made, not misleading, and (iii) engaged in acts, practices, or
courses of business which operated or would operate as a fraud or deceit upon
another person.
106.   By virtue of the foregoing, Drexler, directly or indirectly, violated and,
unless restrained and enjoined, will again violate Section 10(b) of the Exchange Act
[15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.C. § 240.10b-5] thereunder.
SECOND CLAIM FOR RELIEF
Fraud: Aiding and Abetting MusclePharm’s Violations of
Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder
(Alternatively)
107.    The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
108.   MusclePharm, directly or indirectly, acting with scienter, by use of the
means or instrumentalities of interstate commerce, or of the mails, or of a facility of a
national securities exchange, in connection with the purchase or sale of a security
(i) employed devices, schemes, or artifices to defraud, (ii) made untrue statements of
material fact or omitted to state a material fact necessary in light of the circumstances
under which they were made, not misleading, and (iii) engaged in acts, practices, or
courses of business which operated or would operate as a fraud or deceit upon
another person.
109.   As a result of the conduct alleged herein, Drexler aided and abetted
MusclePharm’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 by
knowingly or recklessly providing substantial assistance to MusclePharm.
110.   By reason of the foregoing, Drexler, directly or indirectly, aided and
abetted and, unless restrained and enjoined, will again aid and abet violations of
Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.C. §
240.10b-5] thereunder.

COMPLAINT
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THIRD CLAIM FOR RELIEF
Fraud: Section 17(a) of the Securities Act
111.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
112.   Drexler, directly or indirectly, directly or indirectly, in the offer or sale
of securities, by use of the means or instruments of transportation or communication
in interstate commerce or by use of the mails, acting with the requisite state of mind
(i) employed devices, schemes, or artifices to defraud, (ii) obtained money or
property by means of untrue statements of material fact or omissions of material fact
necessary to make the statements made, in light of the circumstances under which
they were made, not misleading, and (iii) engaged in transactions, practices, or a
course of business which operated or would operate as a fraud or deceit upon the
purchaser.
113.   By virtue of the foregoing, Drexler, directly or indirectly, violated and,
unless restrained and enjoined, will again violate Section 17(a) of the Securities Act
[15 U.S.C. § 77q(a)].
FOURTH CLAIM FOR RELIEF
Fraud: Aiding and Abetting MusclePharm’s Violations of
Section 17(a) of the Securities Act
(Alternatively)
114.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
115.   MusclePharm, directly or indirectly, in the offer or sale of securities, by
use of the means or instruments of transportation or communication in interstate
commerce or by use of the mails, acting with the requisite state of mind (i) employed
devices, schemes, or artifices to defraud, (ii) obtained money or property by means of
untrue statements of material fact or omissions of material fact necessary to make the
statements made, in light of the circumstances under which they were made, not

COMPLAINT
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misleading, and (iii) engaged in transactions, practices, or a course of business which
operated or would operate as a fraud or deceit upon the purchaser.
116.   As a result of the conduct alleged herein, Drexler aided and abetted
MusclePharm’s violations of Section 17(a) of the Securities Act by knowingly or
recklessly providing substantial assistance to MusclePharm.
117.   By reason of the foregoing, Drexler, directly or indirectly, aided and
abetted and, unless restrained and enjoined, will again aid and abet violations of
Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].
FIFTH CLAIM FOR RELIEF
False SEC Filings: Aiding and Abetting MusclePharm’s Violation of
Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and
13a-13 Thereunder
118.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
119.   MusclePharm, which is an issuer of securities registered pursuant to
Section 12 of the Exchange Act, filed materially false and misleading annual,
quarterly, and current reports with the SEC that made untrue statements of material
fact or omitted to state material facts necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading in violation
of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13
thereunder.
120.   As a result of the conduct alleged herein, Drexler aided and abetted
MusclePharm’s violations of Section 13(a) of the Exchange Act and Rules 12b-20,
13a-1, 13a-11, and 13a-13 thereunder by knowingly or recklessly providing
substantial assistance to MusclePharm.
121.   By reason of the foregoing, Drexler, directly or indirectly, aided and
abetted and, unless restrained and enjoined, will again aid and abet violations of
Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1,

COMPLAINT
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13a-11, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-11, and
240.13a-13].
SIXTH CLAIM FOR RELIEF
False Certifications: Exchange Act Rule 13a-14
122.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
123.   As a result of the conduct alleged herein, Drexler falsely certified that
MusclePharm’s quarterly and annual reports (i) did not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not
misleading and (ii) that he designed and evaluated the effectiveness of the registrant’s
ICFR and DCP.
124.    By virtue of the foregoing, Drexler, directly or indirectly, violated and,
unless restrained and enjoined, will again violate Exchange Act Rule 13a-14 [17
C.F.C. § 240.13a-14].
SEVENTH CLAIM FOR RELIEF
Reporting Controls: Aiding and Abetting MusclePharm’s Violations of
Exchange Act Rule 13a-15(a)
125.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
126.   MusclePharm, which is an issuer of securities pursuant to Section 12 of
the Exchange Act and which files annual reports with the SEC pursuant to Section
13(a) of the Exchange Act, failed to maintain required disclosure controls and
procedures and internal control over financial reporting in violation of Rule 13a-15(a)
of the Exchange Act.
127.   As a result of the conduct alleged herein, Drexler aided and abetted
MusclePharm’s violations of Rule 13a-15(a) of the Exchange Act by knowingly or
recklessly providing substantial assistance to MusclePharm.

COMPLAINT
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128.    By reason of the foregoing, Drexler, directly or indirectly, aided and
abetted and, unless restrained and enjoined, will again aid and abet violations of
Exchange Act Rule 13a-15(a) [17 C.F.R. § 240.13a-15(a)].
EIGHTH CLAIM FOR RELIEF
Reporting Controls: Exchange Act Rules 13a-15(b) and 13a-15(c)
129.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
130.   As a result of the conduct alleged herein, Drexler, violated Rules 13a-
15(b) and 13a-15(c) of the Exchange Act by failing to evaluate the effectiveness of
MusclePharm’s ICFR and DCP.
131.    By reason of the foregoing, Drexler, directly or indirectly, violated and,
unless restrained and enjoined, will again violate Rules 13a-15(b) and 13a-15(c) of
the Exchange Act [17 C.F.R. §§ 240.13a-15(b) and 240.13a-15(c)].
NINTH CLAIM FOR RELIEF
Internal Accounting Controls: Aiding and Abetting MusclePharm’s Violation of
Section 13(b)(2)(B) of the Exchange Act
132.    The SEC realleges and incorporates by reference paragraphs 1 through
103 as though fully set forth herein.
133.   MusclePharm failed to devise and maintain a system of internal
accounting controls sufficient to provide reasonable assurances that transactions were
recorded as necessary to permit preparation of financial statements in conformity
with GAAP and any other criteria applicable to such statements in violation of
Section 13(b)(2)(B) of the Exchange Act.
134.   As a result of the conduct alleged herein, Drexler aided and abetted
MusclePharm’s violation of Section 13(b)(2)(B) of the Exchange Act by knowingly
or recklessly providing substantial assistance to MusclePharm.
135.   By reason of the foregoing, Drexler, directly or indirectly, aided and
abetted and, unless restrained and enjoined, will again aid and abet violations of

COMPLAINT
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Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)].
TENTH CLAIM FOR RELIEF
Proxy Disclosures: Violation of Section 14(a) of the Exchange Act
and Rules 14a-3 and 14a-9 Thereunder
136.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as through fully set forth herein.
137.   As a result of the conduct alleged herein, Drexler, directly or indirectly,
by use of mails, or the means of instrumentalities or interstate commerce or any
facility of a national securities exchange, solicited proxies without furnishing each
person solicited a proxy statement containing the information specified by the proxy
rules, and used proxy statements containing statements which, at the time and in light
of the circumstances under which they are made, were false or misleading with
respect to a material fact, or omitted to state material facts necessary to make the
statement therein not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of a proxy for the same meeting or
subject matter which has become false or misleading.
138.   By reason of the foregoing, Drexler violated and, unless restrained and
enjoined, will again violate Section 14(a) of the Exchange Act [15 U.S.C. § 78n(a)]
and Rules 14a-3 and 14a-9 thereunder [17 C.F.R. §§ 240.14a-3 and 240.14a-9].
ELEVENTH CLAIM FOR RELIEF
Clawback: SOX Section 304(a)
139.   The SEC realleges and incorporates by reference paragraphs 1 through
103 as through fully set forth herein.
140.    By virtue of the foregoing, MusclePharm filed reports that were in
material non-compliance with its financial reporting requirements under the federal
securities laws from April 2, 2018, when MusclePharm’s Form 10-K for year-end
2017 was filed until November 14, 2018, when MusclePharm’s Form 10-Q for the
third quarter of 2018 was filed. MusclePharm’s material non-compliance with its

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financial reporting requirements resulting from misconduct that required the company
to prepare accounting restatements for its financial statements for 2017 and the first
three quarters of 2018.
141.   Drexler received or obtained, during the statutory time periods
established by SOX, bonuses, incentives, and/or equity-based compensation which he
failed to reimburse to MusclePharm.
142.   The SEC has not exempted Drexler, pursuant to Section 304(b) of SOX,
from its application under Section 304(a).
143.   By reason of the foregoing, Drexler violated and, unless ordered to
comply will continue to violate, Section 304(a) of SOX [15 U.S.C. § 7243(a)].
RELIEF SOUGHT
WHEREFORE, the SEC respectfully requests that this Court:
I.
Find that Drexler committed the violations alleged in this Complaint;
II.
Enter an injunction, in a form consistent with Rule 65 of the Federal Rules of
Civil Procedure, permanently restraining and enjoining Drexler from violating,
directly or indirectly, the laws and rules he is alleged to have violated in this
Complaint;
III.
Order Drexler to pay civil money penalties pursuant to Section 20(d) of the
Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15
U.S.C. § 78u(d)(3)];
IV.
Order Drexler to reimburse MusclePharm as required by SOX Section 304(a)
[15 U.S.C. § 7243(a)].
V.
Order, pursuant to the Court’s equitable powers, Section 20(e) of the Securities

COMPLAINT
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Act [15 U.S.C. § 77t(e)], and Section 21(d)(2) of the Exchange Act [15 U.S.C. §
78u(d)(2)], that Drexler is prohibited, following the date of entry of the order, from
acting as an officer or director of any issuer that has a class of securities registered
pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is required to
file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)].
VI.
Grant such other and further relief as this Court may deem just and proper.
JURY DEMAND
The SEC demands a trial by jury on all claims so triable.

Respectfully submitted, June 27, 2023.

/s/ Daniel Blau
Daniel Blau
Zachary T. Carlyle
Sharan E. Lieberman
Attorneys for Plaintiff
Securities and Exchange Commission

COMPLAINT 1 

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ZACHARY T. CARLYLE (pro hac vice forthcoming) 
[email protected] 
SHARAN E. LIEBERMAN (pro hac vice forthcoming) 
[email protected] 
SECURITIES AND EXCHANGE COMMISSION 
1961 Stout Street, Suite 1700 
Denver, Colorado 80294-1961 
Telephone: (303) 844-1000 
Facsimile: (303) 297-3529 

Local Counsel: 
DANIEL BLAU (Cal. Bar No. 305008) 
[email protected] 
SECURITIES AND EXCHANGE COMMISSION 
444 S. Flower Street, Suite 900 
Los Angeles, California 90071 
Telephone: (323) 965-3306 
Facsimile: (213) 443-1904 

UNITED STATES DISTRICT COURT 

CENTRAL DISTRICT OF CALIFORNIA 

SECURITIES AND EXCHANGE 
COMMISSION, 

Plaintiff, 

vs. 

RYAN C. DREXLER 

Defendant. 

Case No. 2:23-cv-05102

COMPLAINT AND JURY DEMAND 

Plaintiff, United States Securities and Exchange Commission (the “SEC”), for 

its Complaint against Ryan C. Drexler (“Drexler” or “Defendant”), alleges as 

follows:  

JURISDICTION AND VENUE 

1. The Court has jurisdiction over this action pursuant to Sections 20(b),

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mailto:[email protected]


 

COMPLAINT 2  
 

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20(d), 20(e), and 22(a) of the Securities Act of 1933 (“Securities Act”) [15 U.S.C. 

§§ 77t(b), 77t(d), 77t(e), and 77v(a)] and Sections 21(d), 21(e), and 27(a) of the 

Securities Exchange Act of 1934 (“Exchange Act”) [15 U.S.C. §§ 78u(d), 78u(e) and 

78aa(a)].  

2. Drexler, directly or indirectly, made use of the means or 

instrumentalities of interstate commerce, or of the mails, or of the facilities of a 

national securities exchange in connection with the acts, practices, transactions, and 

courses of business set forth in this Complaint. 

3. Venue lies in this Court pursuant to Section 22(a) of the Securities Act 

[15 U.S.C. § 77v(a)] and Section 27 of the Exchange Act [15 U.S.C. §78aa]. For the 

majority of the time period relevant to this Complaint, Drexler resided in Beverly 

Hills, California, and worked in the headquarters of MusclePharm, Corp. 

(“MusclePharm”), in Burbank, California, and certain of the acts, practices, 

transactions, and courses of business alleged in the Complaint occurred within this 

District.       

4. Drexler entered into a tolling agreement to toll the running of any statute 

of limitations against him from July 8, 2022, through January 4, 2023. Drexler 

entered into a second tolling agreement to toll the running of any statute of limitations 

against him from January 5, 2023 through July 4, 2023.   

SUMMARY 

5. Drexler, during his tenure as Chairman, President, and Chief Executive  

Officer (“CEO”) of MusclePharm, a publicly-traded nutritional supplement company, 

engaged in a scheme to defraud MusclePharm’s investors about the strength of the 

company’s controls over financial reporting and disclosures and the devastating 

impact of MusclePharm’s debt default in the third quarter of 2022. His conduct also 

ran afoul of critical rules regarding the processes, controls, and procedures that public 

companies, like MusclePharm, must have in place to provide assurance that their 

accounting and public reports are accurate.   

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COMPLAINT 3  
 

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6. Drexler’s fraudulent and deceptive conduct manifested itself in two 

specific ways. First, Drexler failed to ensure that, and made false statements about 

whether, MusclePharm had basic processes, controls, and procedures in place to 

ensure that its accounting for revenue, profit, and other important financial metrics – 

all of which was reported to and relied on by investors – was correct.   

7. Drexler was responsible for maintaining appropriate internal control 

over financial reporting (“ICFR”) and disclosure controls and procedures (“DCP”) at 

MusclePharm. Under SEC rules, public companies, such as MusclePharm, are 

required to maintain ICFR and DCP, which include processes designed to provide 

reasonable assurance that their financial reporting complies with generally accepted 

accounting principles (“GAAP”) and controls designed to ensure that information is 

disclosed pursuant to SEC requirements. Drexler failed to ensure that MusclePharm 

maintained appropriate ICFR and DCP and made false and misleading statements 

about both.  

8. In every annual and quarterly report that Drexler signed and certified on 

behalf of MusclePharm between at least year-end 2017 and the third quarter of 2018, 

Drexler certified that he had evaluated MusclePharm’s ICFR and DCP. In fact, he 

had not performed any evaluation. 

9. Drexler’s failure to ensure that MusclePharm maintained ICFR and DCP 

contributed to MusclePharm reporting inaccurate financial statements for at least the 

year-end 2017 through the third quarter of 2018.   

10. Second, in the third quarter of 2022, Drexler engaged in deceptive 

conduct and made misleading statements by hiding from investors that a $10 million 

debt to MusclePharm creditors had been automatically accelerated and was presently 

due, resulting in immediate and catastrophic consequences for the company and its 

investors.    

11. In addition to his fraudulent and deceptive conduct, Drexler also violated 

critical provisions of the securities laws by directing MusclePharm not to report 

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COMPLAINT 4  
 

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exceptional turnover in a key financial position, and engaging in conduct that led to 

MusclePharm underreporting certain perquisite compensation that executives at the 

company received. 

12. Finally, Drexler did not reimburse MusclePharm for cash bonuses that 

he received after filing financial statements that were later restated due to 

misconduct, as required by the Sarbanes-Oxley Act of 2002 (“SOX”). 

13. By engaging in this conduct, Drexler is liable, and unless enjoined, is 

likely to continue to: violate or aid and abet violations of Section 17(a) of the 

Securities Act [15 U.S.C. §§ 77q(a)], Section 10(b) of the Exchange Act [15 U.S.C. § 

78j(b)], and Rule 10b-5 thereunder [17 C.F.R. § 240.10b-5]; violate Section 14(a) of 

the Exchange Act [15 U.S.C. § 78n(a)] and Rules 13a-14, 13a-15(b), 13a-15(c), 14a-

3, and 14a-9 thereunder [17 C.F.R. §§ 240.13a-14, 240.13a-15(b), 240.13a-15(c), 

240.14a-3, and 240.14a-9]; and aid and abet violations of Sections 13(a) and 

13(b)(2)(B) of the Exchange Act [15 U.S.C. §§ 78m(a) and 78m(b)(2)(B)] and Rules 

12b-20, 13a-1, 13a-11, 13a-13, and 13a-15(a) thereunder [17 C.F.R. §§ 240.12b-20, 

240.13a-1, 240.13a-11, 240.13a-13, and 13a-15(a)]. Drexler also violated and, unless 

ordered to comply, is likely to continue to violate, Section 304(a) of SOX [15 U.S.C. 

§ 7243(a)].  

DEFENDANT 

14. Ryan C. Drexler, 52, currently resides in Las Vegas, Nevada. Until 

approximately April 2021, Drexler resided in Beverly Hills, California. Drexler was 

the Chairman of MusclePharm’s board of directors from approximately June 2015 to 

December 2022. He also served as MusclePharm’s CEO from approximately March 

2016 to December 2022 and as MusclePharm’s principal accounting officer (“PAO”) 

and principal financial officer (“PFO”) from approximately September 2017 to April 

2020. Drexler is also MusclePharm’s largest lender and shareholder. From 2015 

through 2022, Drexler executed multiple notes to loan MusclePharm more than $28 

million; certain of those notes were converted to common stock; and he still holds 

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COMPLAINT 5  
 

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secured notes totaling approximately $10 million.   

OTHER RELEVANT ENTITY 

15. MusclePharm Corp., is a Nevada corporation that develops, markets, 

and distributes branded nutritional supplements. Its current principal place of 

business is in Las Vegas, Nevada, but it was headquartered in Burbank, California 

from approximately December 2017 until August 2021. MusclePharm’s securities are 

registered pursuant to Section 12(g) of the Exchange Act and traded on the OTC 

Link, operated by OTC Markets Group Inc., under the symbol “MSLP” or “MSLPQ.” 

In 2015, MusclePharm settled claims brought by the SEC for violations of Sections 

5(a), 5(c), 17(a)(2), and 17(a)(3) of the Securities Act; Sections 13(a), 13(b)(2)(A), 

13(b)(2)(B), and 14(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, 13a-13, 

and 14a-9 thereunder; and Rule 302 of Regulation S-T of the Exchange Act (the 

“2015 SEC Order”). MusclePharm filed for Chapter 11 bankruptcy protection in the 

U.S. Bankruptcy Court for the District of Nevada on December 15, 2022. 

FACTS  

I. BACKGROUND AND FINANCIAL RESTATEMENT.  

16. In August 2015, MusclePharm announced a restructuring plan focused 

on reducing costs and reallocating the company’s resources for profitable growth. In 

its Form 10-K filed on April 2, 2018, MusclePharm announced that this restructuring 

plan was substantially complete.  

17. During the earnings call for the fourth quarter of 2017, Drexler 

highlighted the completion of the restructuring program and proclaimed that the 

company was now on a path to consistent profitable growth. 

18. In order to achieve consistent growth, Drexler pushed MusclePharm’s 

sales team to meet unrealistic quarterly sales targets, and threatened to, and did, fire 

employees who challenged him or failed to achieve the targets.   

19. In this environment, MusclePharm reported quarter over quarter revenue 

growth from the fourth quarter of 2017 through the third quarter of 2018. Drexler 

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COMPLAINT 6  
 

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highlighted this achievement in each of the Company’s press releases and earnings 

calls during that period. 

20. MusclePharm reported its financial results for these periods in its Form 

10-K for 2017 and Forms 10-Q for the first three quarters of 2018, which Drexler 

signed and certified as MusclePharm’s CEO, President, Chairman of the Board of 

Directors, Principal Executive Officer (“PEO”), PFO, and PAO.   

21. During its 2018 audit work, the company’s external auditor detected that 

MusclePharm had recognized revenue at the end of the fourth quarter of 2018 that it 

should have recorded in later periods because certain inventory had been temporarily 

stored off-site in trailers rather than being shipped to MusclePharm’s customers prior 

to year-end.  

22. The company opened an internal investigation to identify the scope and 

cause of the errors. The internal investigation uncovered similar errors with 

unshipped orders impacting the third quarter of 2018, and the company filed a Form 

8-K on March 14, 2019, announcing that its previously reported financial statements 

for the three and nine months ended September 30, 2018, should no longer be relied 

upon. In April 2019, the company announced on Form NT 10-K that it would be 

unable to timely file its 2018 annual report, and in May 2019, the company’s external 

auditor resigned without completing the 2018 audit work.  

23. More than a year later, on August 25, 2020, MusclePharm filed a Form 

10-K that restated its financial statements for year-end 2017 and the first three 

quarters of 2018 (the “Restatement Period”) and included the overdue financial 

statements for 2018 and 2019. 

24. The restatement disclosed that, during the Restatement Period, 

MusclePharm inflated its previously reported quarterly revenues by 9 to 25 percent 

and materially misstated various other aspects of its financial statements. 

25. MusclePharm disclosed in its August 25, 2020 Form 10-Q that its 

management concluded that MusclePharm had numerous material weaknesses in its 

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COMPLAINT 7  
 

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internal control over financial reporting and that its disclosure controls and 

procedures were not effective. 

26. Drexler signed and certified MusclePharm’s August 25, 2020 Form 10-

K as MusclePharm’s CEO, President, Chairman of the Board of Directors, and PEO. 

27. The Form 10-K filed on August 25, 2020, included a plan to remediate 

these material weaknesses, but MusclePharm did not correct the material weaknesses.   

28.  According to its most recent quarterly report, filed on Form 10-Q on 

May 16, 2022, MusclePharm again disclosed material weaknesses in the design and 

operation of virtually all aspects of its internal controls. Specifically, MusclePharm 

disclosed that:  

“The Company has deficiencies in the design and operation of its internal 

controls in the financial processes related to the accounting for cash, accounts 

receivable, accounts payable, inventory, accrued liabilities, income taxes, debt, 

equity, revenue, costs of sales, stock-based compensation, and expenses 

classification. In addition, the Company has insufficient controls over the 

financial close and reporting process, including account reconciliations and 

preparation and review of financial statements and related disclosures.” 

29. On August 17, 2022, MusclePharm announced on Form NT 10-Q that it 

would not be able to timely file its quarterly report for the second quarter of 2022. 

Shortly thereafter, on August 22, 2022, MusclePharm announced in a Form 8-K, 

signed by Drexler, that its financial statements for the year ended December 31, 2021, 

and quarter ended March 31, 2022, should no longer be relied upon because they 

reflected errors resulting in material overstatements to reported revenues. 

30. MusclePharm still has not completed the work necessary to restate its 

2021 and first quarter 2022 financial statements.    

II. DREXLER FAILED TO ENSURE THAT MUSCLEPHARM 

MAINTAINED APPROPRIATE ICFR AND DCP. 

31. Exchange Act Rule 13a-15(a) requires issuers like MusclePharm to 

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COMPLAINT 8  
 

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maintain ICFR and DCP.  

32. ICFR is defined in Exchange Act Rule 13a-15(f) in part as “a process 

designed by, or under the supervision of, the issuer’s principal executive and 

principal financial officers, ... to provide reasonable assurance regarding the 

reliability of financial reporting and preparation of financial statements for external 

purposes in accordance with generally accepted accounting principles ....”  

33. DCP are defined in Exchange Act Rule 13a-15(e) in part as “controls 

and other procedures of an issuer that are designed to ensure that information 

required to be disclosed by the issuer ... is recorded, processed, summarized, and 

reported, within the time periods specified in the [SEC’s] rules and forms.”  

34. ICFR and DCP are the responsibility of a company’s PEO and PFO. 

Throughout the Restatement Period, Drexler was MusclePharm’s PEO and PFO. In 

those roles, Drexler was responsible for ensuring that MusclePharm maintained 

appropriate ICFR and DCP. 

35. Drexler confirmed this responsibility in each and every quarterly and 

annual report on Forms 10-Q and 10-K he signed on behalf of MusclePharm during 

the Restatement Period. The quarterly and annual reports Drexler signed on behalf of 

MusclePharm during the Restatement Period are comprised of MusclePharm’s 2017 

Form 10-K filed on April 2, 2018; first quarter 2018 Form 10-Q filed on May 15, 

2018; second quarter 2018 Form 10-Q filed on August 14, 2018; and third quarter 

2018 Form 10-Q filed on November 14, 2018. 

36. Each one of those filings included a SOX 302 certification, signed by 

Drexler as MusclePharm’s PEO and PFO, which stated that Drexler: 

a. was “responsible for establishing and maintaining disclosure 

controls and procedures (as defined in Exchange Act Rules 13a-

15(e) ...) and internal control over financial reporting (as defined 

in Exchange Act Rules 13a-15(f) ...) for [MusclePharm]”; 

b. “[d]esigned such disclosure controls and procedures, or caused 

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such disclosure controls and procedures to be designed under [his] 

supervision”; and 

c. “[d]esigned such internal control over financial reporting, or 

caused such internal control over financial reporting to be 

designed under [his] supervision.”  

37. Drexler similarly confirmed his responsibilities for ensuring that 

MusclePharm maintain ICFR in letters to MusclePharm’s external auditor that he 

signed (“Management Representation Letters”). For example:  

a. on April 2, 2018, Drexler signed a Management Representation 

Letter in connection with the audit for the year ended December 

31, 2017, that asserted that Drexler was “responsible for the fair 

presentation in the financial statements of financial position, 

results of operations, and cash flows in conformity with 

accounting principles generally accepted in the United States” and 

for “adopting sound accounting policies, establishing and 

maintaining internal control, and preventing and detecting fraud”; 

b. on May 15, 2018 and August 14, 2018, Drexler signed 

Management Representation Letters in connection with the 

reviews of MusclePharm’s financial statements for the quarters 

ended March 31, 2018 and June 30, 2018 that asserted that 

Drexler was “responsible for the fair presentation of the financial 

statements in conformity with accounting principles generally 

accepted in the United States of America” and “for establishing 

and maintaining effective internal control over financial 

reporting”; and 

c. on November 13, 2018, Drexler signed a Management 

Representation Letter in connection with the review of 

MusclePharm’s financial statements as of September 30, 2018 that 

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asserted that he was “responsible for the fair presentation ... of 

financial position, results of operations, and cash flows in 

conformity with accounting principles generally accepted in the 

United States of America” and “for the design and implementation 

of programs and controls to prevent and detect fraud.” 

38. Despite the assertions made in each of the SOX 302 certifications and 

Management Representation Letters, Drexler failed to ensure that MusclePharm 

maintained appropriate ICFR and DCP. Indeed, Drexler never read MusclePharm’s 

ICFR and was not aware of whether MusclePharm had any documented DCP at all. 

39. Further, when the company’s external auditor resigned in May 2019, it 

noted that during the 2018 fiscal year “the internal controls necessary for the 

Company to develop reliable financial statements do not exist.”   

III. DREXLER MADE MATERIALLY FALSE AND MISLEADING 

STATEMENTS REGARDING HIS EVALUATION OF ICFR AND DCP 

DURING THE RESTATEMENT PERIOD. 

40. Drexler was MusclePharm’s PEO and PFO when he signed each of 

MusclePharm’s quarterly reports on Form 10-Q and its annual report on Form 10-K, 

as well as SOX 302 certifications for each filing, during the Restatement Period.   

41. With respect to ICFR, in each and every SOX 302 certification that 

Drexler signed as MusclePharm’s PEO and PFO during the Restatement Period, he 

affirmed that he “disclosed, based on [his] most recent evaluation of internal control 

over financial reporting” all significant deficiencies, material weaknesses, and fraud. 

(Emphasis added). 

42. With respect to DCP, in each and every annual and quarterly report that 

Drexler signed as MusclePharm’s PEO and PFO during the Restatement Period, he 

also affirmed that he “evaluated the effectiveness of [MusclePharm’s] disclosure 

controls and procedures (as defined in Rules 13a-15(e) ...), as of the end of the 

period” and “[b]ased on such evaluation, [he] has concluded that ... [MusclePharm’s] 

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COMPLAINT 11  
 

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disclosure controls and procedures are designed at a reasonable assurance level and 

are effective to provide reasonable assurance that information [the company is] 

required to disclose in reports that [it] file[s] or submit[s] under the Exchange Act is 

recorded, processed, summarized, and reported within the time periods specified in 

the rules and forms of the [SEC], and that such information is accumulated and 

communicated to [MusclePharm’s] management, including [Drexler], as appropriate, 

to allow timely decisions regarding required disclosure.” 

43. Additionally, in each and every SOX 302 certification that Drexler 

signed as MusclePharm’s PEO and PFO during the Restatement Period, he affirmed 

that he “[e]valuated the effectiveness of [MusclePharm’s] disclosure controls and 

procedures.” 

44. A reasonable investor would have understood from these statements that 

Drexler had evaluated MusclePharm’s ICFR and DCP for each reporting period 

during the Restatement Period, that any significant deficiencies or material 

weaknesses in ICFR based on his evaluation were identified, and that Drexler had 

concluded that DCP was designed and effective at a reasonable assurance level based 

on his evaluation. 

45. In reality, Drexler did not perform an evaluation of MusclePharm’s 

ICFR or DCP during the Restatement Period. Moreover, no one under his direction 

performed an evaluation of MusclePharm’s ICFR or DCP. MusclePharm did not have 

a sub-certification process in place for testing ICFR and Drexler did not see results 

from any assessment of ICFR. Moreover, Drexler was unaware of whether 

MusclePharm had any documented DCP.  

46. Each of the above statements regarding Drexler’s evaluation of 

MusclePharm’s ICFR and DCP was false when made, and Drexler knew or was 

reckless in not knowing, and should have known, that his statements regarding his 

evaluation of MusclePharm’s ICFR and DCP were false and misleading. Drexler, 

when making statements regarding his evaluation of ICFR and DCP, knew that he 

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COMPLAINT 12  
 

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had not performed an evaluation of MusclePharm’s ICFR or DCP during the 

Restatement Period, and had not seen results of any other assessment of ICFR or 

DCP.  

47. The above misrepresentations regarding Drexler’s evaluation of 

MusclePharm’s ICFR and DCP were material because, among other things, investors 

and potential investors would consider Drexler’s statements regarding his evaluation 

of MusclePharm’s ICFR and DCP important when assessing whether MusclePharm’s 

reported financial results were accurate. 

IV. DREXLER OBTAINED MONEY FOR MUSCLEPHARM BY 

MEANS OF THESE FALSE AND MISLEADING STATEMENTS. 

48. Drexler obtained money for MusclePharm by means of the 

misstatements regarding his evaluation of MusclePharm’s ICFR and DCP because, 

from at least June 2018 to May 2019, through private placements, MusclePharm sold 

(i) restricted stock to board members to pay for board fees, (ii) common stock to 

plaintiffs engaged in civil litigation with the company to pay for litigation 

settlements, and (iii) common stock to vendors to pay for invoices. As the CEO and 

Chairman of the Board of Directors, Drexler voted to approve these private 

placement sales and was involved in implementing the sales by, for example, signing 

letters to the stock transfer services company directing them to issue the shares and 

send stock certificates to the applicable parties.  

V. DREXLER’S FAILURE TO ENSURE THAT MUSCLEPHARM 

MAINTAINED ICFR LED TO MATERIALLY FALSE FINANCIAL 

STATEMENTS.   

49. In the Form 10-K filed on August 25, 2020, MusclePharm restated its 

financial statements for the Restatement Period. The restatement disclosed that, 

during the Restatement Period, MusclePharm inflated its previously reported 

quarterly revenues by 9 to 25 percent, overstated its gross margins by 22 to 49 

percent, understated its customer credits by 23 to 38 percent, understated its inventory 

Case 2:23-cv-05102   Document 1   Filed 06/27/23   Page 12 of 32   Page ID #:12



 

COMPLAINT 13  
 

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by 23 to 34 percent, and overstated its advertising and promotional expenses by 284 

to 594 percent. 

50. These errors were caused, in part, by Drexler’s failure to implement and 

maintain ICFR for MusclePharm and the resulting material weaknesses in 

MusclePharm’s internal controls. 

51. MusclePharm disclosed in its August 25, 2020 Form 10-K that its 

management concluded that eleven “material weaknesses” existed throughout the 

Restatement Period. The filing states that a material weakness is “a deficiency, or a 

combination of deficiencies, in internal control over financial reporting, such that 

there is a reasonable possibility that a material misstatement of … annual or interim 

financial statements will not be prevented or detected on a timely basis.” The material 

weaknesses identified by MusclePharm’s management included: 

a. “Pressure to achieve sales targets gave rise to the premature and/or 

inappropriate recognition of revenues, typically occurring at or 

near the end of financial reporting periods”; 

b. “The Company’s internal controls failed and/or were not adequate 

to ensure that there was effective testing of period end sales 

cutoff, including a proper review and comparison of invoice dates 

and related proof of delivery”;  

c. “Inadequate segregation of duties, allowing for an improper 

alignment of sales and operations under common leadership”; 

d. “Management did not maintain an effective control environment, 

including ensuring that required accounting methodologies, 

policies, and technical accounting personnel were in place. This 

control deficiency led to a series of corrections related to the years 

2018 and 2017 and resulted in a restatement to the respective 

previously issued financial statements”;  

e. “The Company did not properly classify payments to customers, 

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COMPLAINT 14  
 

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primarily for promotional activity, as a reduction in the transaction 

price with its customers, instead treating such payments as an 

advertising and promotions activity, a component of operating 

expense”;  

f. “The Company reported certain sales transactions prior to transfer 

of control of goods, inconsistent with customer sales agreements 

and the Company’s customary practices”; 

g. “The Company did not properly estimate the expected value of 

customer payments, in the form of credits, at each quarter period 

end in 2018. In addition, the Company understated its accrual for 

customers credits for the year ended December 31, 2017”; and  

h. “The Company lacks the proper internal control documentation 

and testing, and therefore internal controls were not consistently 

performed.”  

52. Drexler signed and certified MusclePharm’s August 25, 2020 Form 10-

K as MusclePharm’s CEO, President, Chairman of the Board of Directors, and PEO. 

VI. DREXLER MADE MATERIALLY MISLEADING STATEMENTS 

ABOUT MUSCLEPHARM’S DEBT. 

53. In October 2021 and June 2022, MusclePharm raised over $10 million 

from a group of institutional investors (the “Noteholders”) through the sale of notes 

and warrants (the “Notes”).  

54. In August and September 2022, the Noteholders sent letters to the 

company reserving their rights under the Notes because MusclePharm engaged in 

conduct that caused two events of default. Specifically, the Noteholders stated that 

MusclePharm had: (i) provided materially untrue or incorrect financial statements as 

evidenced by the company’s August 22, 2022 announcement that its 2021 and first 

quarter 2022 financial statements should no longer be relied upon; and (ii) not 

replaced the resigning CFO with a new CFO who was not objectionable to the 

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COMPLAINT 15  
 

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Noteholders.  

55. Drexler signed a MusclePharm Form 8-K dated September 19, 2022, 

disclosing the receipt of these letters, but also assuring investors that “the 

Noteholders have not accelerated payment of the outstanding balances under the 

Notes and have not informed the Company that the Noteholders intend to accelerate 

payment of the outstanding balances under the Notes.” 

56. A reasonable investor would have understood from this disclosure that 

MusclePharm’s debt under the Notes had not been accelerated. 

57. The Form 8-K omitted the fact that the Notes included a “right o[f] 

automatic acceleration,” which provided that “the Holder need not provide, and the 

Company hereby waives, any presentment, demand, protest or other notice [of 

acceleration] of any kind.” As such, MusclePharm’s debt was automatically 

accelerated at the time the event of default occurred, which had an immediate impact 

on the company’s liquidity and triggered its obligation to disclose an acceleration of 

direct financial obligations under Item 2.04 of Form 8-K.   

58. The September 19, 2022 Form 8-K was misleading because it indicated 

that the company would not suffer any meaningful negative repercussions as a result 

of the events of default unless and until it received a payment demand from the 

Noteholders. In fact, the event of default had an immediate negative impact on 

MusclePharm’s liquidity.  

59. Drexler’s misleading statement about the acceleration of the company’s 

debt was material to reasonable investors because the status of the debt was central to 

the company’s ability to continue normal business operations and maintain control 

over its assets.   

60. On September 22, 2022, just three days after MusclePharm filed the 

Form 8-K, the Noteholders sent a payment demand letter to Drexler stating that the 

outstanding balances under the Notes were “immediately due and payable” and that 

“the Notes have been accruing, and will continue to accrue, Default Interest.”      

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COMPLAINT 16  
 

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61. Thereafter, the Noteholders exercised their rights under the Notes to 

secure payment of the debt by sweeping the company’s bank accounts in 

approximately October 2022, causing MusclePharm to cease all normal business 

operations, and placing the company’s assets up for auction in approximately 

November 2022, forcing MusclePharm to seek bankruptcy protection to halt the asset 

sale. 

62. Drexler knew or was reckless in not knowing, and should have known, 

that his statement regarding the acceleration of the company’s debt was misleading. 

The September 19, 2022 Form 8-K included direct quotes from the acceleration 

provision of the Notes but omitted language from the very same paragraph describing 

the right of automatic acceleration. This selective citation to the acceleration 

provision shows that Drexler knew or was reckless in not knowing, and should have 

known, that the Notes automatically accelerated without notice. Drexler also knew or 

was reckless in not knowing, and should have known, that acceleration of the Notes 

would cause immediate and devastating consequences for the company. And, in fact, 

these consequences came to light just three days later when the Noteholders sent a 

payment demand, which ultimately resulted in the Noteholders sweeping the 

company’s bank accounts and placing its assets up for auction in an effort to secure 

payment of the Notes. 

VII. DREXLER ENGAGED IN FRAUDULENT OR DECEITFUL 

CONDUCT. 

63. As detailed above, Drexler engaged in deceptive conduct regarding the 

evaluation of MusclePharm’s ICFR and DCP, as well as the status of the company’s 

debt. Among other things, Drexler:  

a. did not evaluate the effectiveness of the company’s ICFR and 

DCP, despite the requirements to do so in Exchange Act Rules 

13a-15(b) and (c); 

b. signed SOX 302 certifications during the Restatement Period 

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COMPLAINT 17  
 

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attesting to the fact that he evaluated MusclePharm’s ICFR and 

DCP when he had not performed any evaluation of the company’s 

ICFR or DCP;  

c. signed each annual and quarterly report during the Restatement 

Period attesting to the fact that he evaluated MusclePharm’s DCP 

and concluded that they were effective when he had not performed 

any evaluation of the DCP; and 

d. withheld information from investors about the Notes’ right of 

automatic acceleration and the immediate and catastrophic impact 

it would have on the company and its investors. 

64. Drexler knew or was reckless in not knowing, and should have known, 

of his deceptive conduct. Drexler knew or was reckless in not knowing, and should 

have known, that he had not performed an evaluation of MusclePharm’s ICFR or 

DCP. And Drexler knew or was reckless in not knowing, and should have known, 

that the Notes automatically accelerated without notice and that acceleration of the 

Notes would cause immediate and devastating consequences for the company. 

VIII. DREXLER AIDED AND ABETTED MUSCLEPHARM’S FRAUD. 

65. MusclePharm, through Drexler, engaged in deceptive conduct and made 

material false and misleading statements by failing to properly evaluate its ICFR and 

DCP during the Restatement Period and making material misstatements about those 

evaluations in its Form 10-K and Forms 10-Q. MusclePharm also engaged in 

deceptive conduct and made material misleading statements by withholding 

information from investors regarding the acceleration of the company’s debt and 

making misleading statements about the status of the company’s debt in its 

September 19, 2022 Form 8-K.  

66. MusclePharm, through Drexler, knew or was reckless in not knowing, 

and should have known, that its conduct was deceptive and that its statements were 

false and misleading. 

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COMPLAINT 18  
 

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67. For the reasons detailed above, Drexler knowingly or recklessly 

substantially assisted MusclePharm’s deceptive conduct and misstatements. Among 

other things, Drexler (i) acting as MusclePharm’s PEO and PFO, did not evaluate the 

effectiveness of the company’s ICFR and DCP, (ii) signed SEC filings on behalf of 

MusclePharm that contained material misstatements regarding his evaluations of 

MusclePharm’s ICFR and DCP, (iii) withheld information from MusclePharm 

investors regarding the acceleration of MusclePharm’s debt, and (iv) signed the 

September 19, 2022 Form 8-K on behalf of MusclePharm that contained material 

misleading statements regarding the status of MusclePharm’s debt. 

IX. DREXLER’S FAILURE TO ENSURE THAT MUSCLEPHARM 

MAINTAINED DCP LED TO UNDERREPORTED PERQUISITES AND 

VIOLATIONS OF THE PROXY SOLICITATION PROVISIONS OF 

THE FEDERAL SECURITIES LAWS.    

68. Accurate disclosure of executive perquisites was the primary focus of 

the 2015 SEC Order. Pursuant to the 2015 SEC Order, MusclePharm engaged an 

independent compliance consultant (“ICC”) to, among other things, strengthen the 

disclosure controls and procedures relevant to accurate disclosure of perquisite 

compensation.  

69. In February 2017, the company certified to the SEC that it had complied 

with the undertakings in the 2015 SEC Order, in part, by implementing a disclosure 

control recommended by the ICC to use an “[a]nnual questionnaire[] ... provided to 

the members of the Board of Directors and executives to identify any perquisites.” 

(“D&O questionnaire”).  

70. MusclePharm used a D&O questionnaire in early 2017 to identify 2016 

perquisites. But, the very next year, after Drexler took over the PFO and PAO roles in 

the third quarter of 2017, neither he nor anyone else at the company used a D&O 

questionnaire, or any other controls, to identify 2017 perquisites for its named 

executive officers: Drexler and the Executive Vice President of Sales.   

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COMPLAINT 19  
 

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71. MusclePharm’s Travel and Expense Policy outlined the procedures for 

obtaining reimbursement for business expenses, including specifically identifying the 

business purpose of the expense and submitting original receipts.    

72. During 2017, Drexler disregarded these procedures by seeking 

reimbursement for expenses that were not supported by any business purpose or 

appropriate documentation.  

73. Drexler obtained reimbursement for significant commuting expenses and 

other expenses not integrally and directly related to his job that should have been 

classified as perquisites.   

74. Based on this conduct, Drexler received undisclosed perquisites in 2017 

comprised of approximately $129,200 in personal legal fees, $66,200 of tax gross-ups 

on restricted stock, $22,800 in commuting and living expenses, $8,300 in furniture 

expenses, and $4,500 of other personal expenses. 

75. As a result of the conduct described above, MusclePharm materially 

underreported executive perquisites in its 2017 Form 10-K, which was signed by 

Drexler, by approximately $231,000 (88 percent) for Drexler and approximately 

$107,900 (54 percent) for the Executive Vice President of Sales.  

76. MusclePharm filed a definitive proxy statement on October 26, 2018, 

that it used to solicit proxies in connection with, among other things, the re-election 

of Drexler to the board of directors and an advisory vote on the executive 

compensation packages for Drexler and other executive officers.  

77. Drexler, as a director of the company, participated in the solicitation. 

78. Section 14(a) of the Exchange Act makes it unlawful to solicit any proxy 

with respect to any security (other than an exempted security) registered pursuant to 

Section 12 of the Exchange Act in contravention of such rules and regulations as the 

SEC may prescribe. Rule 14a-3 provides that no solicitation of a proxy may occur 

unless each person solicited is concurrently furnished or has previously been 

furnished with a proxy statement containing the information specified by Schedule 

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COMPLAINT 20  
 

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14A, including executive compensation. Rule 14a-9 prohibits the use of proxy 

statements containing statements that are materially false or misleading by omission.     

79. The proxy statement reported the same executive perquisites as those 

reported in MusclePharm’s 2017 Form 10-K executive compensation disclosures. As 

a result of Drexler’s conduct in connection with the disclosures described above, 

MusclePharm materially underreported executive perquisites in the October 26, 2018 

proxy statement by approximately $231,000 (88 percent) for Drexler and 

approximately $107,900 (54 percent) for the Executive Vice President of Sales. 

80. Accurate and transparent executive compensation disclosures are 

material because the amounts that executives are paid, as well as the amounts 

executives are paid as perquisites, are important to an investor’s assessment of a 

company’s likely future profitability and the alignment of management’s interests 

with the interests of shareholders. 

81. Drexler should have known that the perquisite disclosures in the proxy 

statement were materially misstated because, among other reasons, he had knowledge 

of the unreported perquisites he received and he failed to exercise reasonable care 

with respect to DCP involving executive compensation.    

X. DREXLER DIRECTED MUSCLEPHARM NOT TO FILE REQUIRED 

CURRENT REPORTS ON FORM 8-K REGARDING 

MUSCLEPHARM’S PAO. 

82. MusclePharm experienced exceptional, undisclosed turnover in the PAO 

position in the third quarter of 2017. In fact, in just a single quarter, three different 

people held the position of PAO at MusclePharm. In July 2017, the interim 

CFO/PAO resigned and was replaced by a new CFO/PAO in August 2017, but he 

resigned the following month. Whereupon Drexler was appointed as the interim PAO 

in September 2017.  

83. Issuers are required to disclose all changes to the PAO position on Item 

5.02 of Form 8-K within four business days of the event.  

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COMPLAINT 21  
 

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84. None of the third quarter 2017 changes were timely disclosed.  

85. In August and September 2017, Drexler received and reviewed draft 

Forms 8-K related to one PAO’s resignation, but he instructed the company’s 

controller not to file the disclosure.  

86. Instead, MusclePharm waited until November 14, 2017, to file a Form 8-

K, which Drexler signed, that belatedly disclosed all the changes that occurred in the 

PAO position in the prior quarter. 

XI.  DREXLER FAILED TO REIMBURSE MUSCLEPHARM FOR 

BONUSES RECEIVED IN THE 12 MONTHS FOLLOWING 

MISSTATED REPORTS. 

87. SOX Section 304(a) requires the CEO and CFO of any issuer required to 

prepare an accounting restatement due to material non-compliance with financial 

reporting requirements under the securities laws as a result of misconduct to 

reimburse the issuer for (i) any bonus or other incentive or equity based 

compensation received by that person from the issuer during the twelve-month period 

following the first public issuance or filing with the SEC of the misstated document, 

and (ii) any profits realized from the sale of securities of the issuer during that 

twelve-month period. 

88. MusclePharm was required to restate its financial statements contained 

in its Form 10-K for the year ended December 31, 2017, and its Forms 10-Q for the 

quarters ended March 31, 2018, June 30, 2018, and September 30, 2018, because, as 

a result of misconduct, its financial statements did not comport with GAAP.  

89. MusclePharm’s restatements for those periods were disclosed in its Form 

10-K filed with the SEC on August 25, 2020.    

90. Drexler received bonuses in the 12-month period following the first 

public issuance or filing with the SEC of the misstated Form 10-K for the year ended 

December 31, 2017, and one or more of the misstated Forms 10-Q, including a 

$100,000 cash bonus paid on May 31, 2018, and a $250,000 cash bonus paid on 

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COMPLAINT 22  
 

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August 15, 2018.  

91. Drexler has not reimbursed any bonus amount to MusclePharm. 

XII. DREXLER VIOLATED, OR AIDED AND ABETTED 

MUSCLEPHARM’S VIOLATIONS OF, REPORTING, 

CERTIFICATION, REPORTING CONTROLS, AND INTERNAL 

CONTROLS PROVISIONS OF THE FEDERAL SECURITIES LAWS. 

A. Drexler Aided and Abetted MusclePharm’s Violation of Reporting 

Provisions of the Federal Securities Laws. 

92. Section 13(a) of the Exchange Act and Rules 13a-1, 13a-11, and 13a-13 

thereunder require issuers like MusclePharm to file reports with the SEC containing 

such information as the SEC’s rules prescribe. Further, Exchange Act Rule 12b-20 

requires that an issuer’s statement or report contain such further material information 

as may be necessary to make the required statements, in light of the circumstances 

under which they were made, not misleading. 

93. As detailed above, MusclePharm violated these reporting provisions by 

(i) filing annual and quarterly reports with the SEC that misstated Drexler’s 

evaluation of the company’s ICFR and DCP, (ii) filing a current report on September 

19, 2022, that contained misleading statements about the Notes acceleration as 

described above, and (iii) failing to file required current reports regarding PAO 

turnover.    

94. Also as detailed above, Drexler aided and abetted these violations by 

knowingly or recklessly providing substantial assistance to MusclePharm’s 

violations. Among other things, Drexler (i) signed and certified each of the annual 

and quarterly reports that included false and misleading information about his own 

conduct, (ii) signed the misleading September 19, 2022 current report on Form 8-K, 

and (iii) directed the company not to timely file a current report regarding the 

departure of one of the PAOs in third quarter 2017.  

  

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COMPLAINT 23  
 

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B. Drexler Violated the Certification Provision of the Federal 

Securities Laws. 

95. Rule 13a-14 of the Exchange Act requires, in pertinent part, that each 

annual and quarterly report include certifications signed by the issuer’s PEO and PFO 

which include representations that (i) based on the certifier’s knowledge, the report 

does not contain any untrue statement of a material fact or omit to state a material fact 

necessary to make the statements made, in light of the circumstances under which 

such statements were made, not misleading with respect to the period covered by the 

report and (ii) the certifier designed and evaluated the effectiveness of the registrant’s 

ICFR and DCP.  

96. Drexler violated Rule 13a-14 by certifying MusclePharm’s annual and 

quarterly reports during the Restatement Period because (i) he signed the certification 

without a sufficient basis to believe the certifications were accurate and (ii) he knew 

that the reports included material misstatements or omissions regarding his design 

and evaluation of ICFR and DCP.    

C. Drexler Violated and Aided and Abetted MusclePharm’s Violations 

of the Reporting Controls Provision of the Federal Securities Laws. 

97. Rule 13a-15(a) of the Exchange Act requires issuers like MusclePharm 

to maintain DCP and ICFR.  

98. MusclePharm violated Rule 13a-15(a) by failing to maintain DCP or 

ICFR as required. Specifically, MusclePharm failed to implement DCP concerning 

the identification and reporting of executive perquisites, and failed to maintain 

appropriate ICFR to prevent and detect accounting errors during the Restatement 

Period.  

99. Drexler knowingly or recklessly substantially assisted MusclePharm’s 

violation of Rule 13a-15(a). For example, although the company certified to the SEC 

staff in February 2017 that it implemented a D&O questionnaire disclosure control, 

Drexler failed to use D&O questionnaires, or any other controls, to identify 2017 

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COMPLAINT 24  
 

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perquisites that he and the Executive Vice President of sales received. Additionally, 

as set forth above, Drexler failed to ensure that MusclePharm maintained appropriate 

ICFR and DCP.   

100. Drexler additionally violated Rules 13a-15(b) and 13a-15(c) of the 

Exchange Act by failing to evaluate the company’s ICFR and DCP, as required by 

those provisions.  

D. Drexler Aided and Abetted MusclePharm’s Violation of the Internal 

Controls Provision of the Federal Securities Laws. 

101. Section 13(b)(2)(B) of the Exchange Act requires issuers like 

MusclePharm to devise and maintain a system of sufficient internal accounting 

controls.  

102. In violation of Section 13(b)(2)(B), MusclePharm failed to maintain a 

system of internal accounting controls sufficient to provide reasonable assurance that 

revenue, customer credits, gross profit margin, advertising and promotional expenses, 

and inventory complied with GAAP.  

103. In his role as PEO, PFO, and PAO, Drexler was responsible for devising 

and maintaining MusclePharm’s system of internal accounting controls and, by 

failing to do so, Drexler knowingly or recklessly substantially assisted 

MusclePharm’s violation of Section 13(b)(2)(B) of the Exchange Act.    

FIRST CLAIM FOR RELIEF 

Fraud: Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 

104. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

105. Drexler, directly or indirectly, acting with scienter, by use of the means 

or instrumentalities of interstate commerce, or of the mails, or of a facility of a 

national securities exchange, in connection with the purchase or sale of a security 

(i) employed devices, schemes, or artifices to defraud, (ii) made untrue statements of 

material fact or omitted to state a material fact necessary in light of the circumstances 

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COMPLAINT 25  
 

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under which they were made, not misleading, and (iii) engaged in acts, practices, or 

courses of business which operated or would operate as a fraud or deceit upon 

another person. 

106. By virtue of the foregoing, Drexler, directly or indirectly, violated and, 

unless restrained and enjoined, will again violate Section 10(b) of the Exchange Act 

[15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.C. § 240.10b-5] thereunder.  

SECOND CLAIM FOR RELIEF 

Fraud: Aiding and Abetting MusclePharm’s Violations of  

Section 10(b) of the Exchange Act and Rule 10b-5 Thereunder 

(Alternatively) 

107.  The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

108. MusclePharm, directly or indirectly, acting with scienter, by use of the 

means or instrumentalities of interstate commerce, or of the mails, or of a facility of a 

national securities exchange, in connection with the purchase or sale of a security 

(i) employed devices, schemes, or artifices to defraud, (ii) made untrue statements of 

material fact or omitted to state a material fact necessary in light of the circumstances 

under which they were made, not misleading, and (iii) engaged in acts, practices, or 

courses of business which operated or would operate as a fraud or deceit upon 

another person. 

109. As a result of the conduct alleged herein, Drexler aided and abetted 

MusclePharm’s violations of Section 10(b) of the Exchange Act and Rule 10b-5 by 

knowingly or recklessly providing substantial assistance to MusclePharm. 

110. By reason of the foregoing, Drexler, directly or indirectly, aided and 

abetted and, unless restrained and enjoined, will again aid and abet violations of 

Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 [17 C.F.C. § 

240.10b-5] thereunder.  

 

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COMPLAINT 26  
 

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THIRD CLAIM FOR RELIEF 

Fraud: Section 17(a) of the Securities Act 

111. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

112. Drexler, directly or indirectly, directly or indirectly, in the offer or sale 

of securities, by use of the means or instruments of transportation or communication 

in interstate commerce or by use of the mails, acting with the requisite state of mind 

(i) employed devices, schemes, or artifices to defraud, (ii) obtained money or 

property by means of untrue statements of material fact or omissions of material fact 

necessary to make the statements made, in light of the circumstances under which 

they were made, not misleading, and (iii) engaged in transactions, practices, or a 

course of business which operated or would operate as a fraud or deceit upon the 

purchaser. 

113. By virtue of the foregoing, Drexler, directly or indirectly, violated and, 

unless restrained and enjoined, will again violate Section 17(a) of the Securities Act 

[15 U.S.C. § 77q(a)]. 

FOURTH CLAIM FOR RELIEF 

Fraud: Aiding and Abetting MusclePharm’s Violations of  

Section 17(a) of the Securities Act 

(Alternatively) 

114. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

115. MusclePharm, directly or indirectly, in the offer or sale of securities, by 

use of the means or instruments of transportation or communication in interstate 

commerce or by use of the mails, acting with the requisite state of mind (i) employed 

devices, schemes, or artifices to defraud, (ii) obtained money or property by means of 

untrue statements of material fact or omissions of material fact necessary to make the 

statements made, in light of the circumstances under which they were made, not 

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COMPLAINT 27  
 

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misleading, and (iii) engaged in transactions, practices, or a course of business which 

operated or would operate as a fraud or deceit upon the purchaser. 

116. As a result of the conduct alleged herein, Drexler aided and abetted 

MusclePharm’s violations of Section 17(a) of the Securities Act by knowingly or 

recklessly providing substantial assistance to MusclePharm. 

117. By reason of the foregoing, Drexler, directly or indirectly, aided and 

abetted and, unless restrained and enjoined, will again aid and abet violations of 

Section 17(a) of the Securities Act [15 U.S.C. § 77q(a)].  

FIFTH CLAIM FOR RELIEF 

False SEC Filings: Aiding and Abetting MusclePharm’s Violation of  

Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and  

13a-13 Thereunder 

118. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

119. MusclePharm, which is an issuer of securities registered pursuant to 

Section 12 of the Exchange Act, filed materially false and misleading annual, 

quarterly, and current reports with the SEC that made untrue statements of material 

fact or omitted to state material facts necessary in order to make the statements made, 

in light of the circumstances under which they were made, not misleading in violation 

of Section 13(a) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11, and 13a-13 

thereunder.  

120. As a result of the conduct alleged herein, Drexler aided and abetted 

MusclePharm’s violations of Section 13(a) of the Exchange Act and Rules 12b-20, 

13a-1, 13a-11, and 13a-13 thereunder by knowingly or recklessly providing 

substantial assistance to MusclePharm.  

121. By reason of the foregoing, Drexler, directly or indirectly, aided and 

abetted and, unless restrained and enjoined, will again aid and abet violations of 

Section 13(a) of the Exchange Act [15 U.S.C. § 78m(a)] and Rules 12b-20, 13a-1, 

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COMPLAINT 28  
 

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13a-11, and 13a-13 thereunder [17 C.F.R. §§ 240.12b-20, 240.13a-1, 240.13a-11, and 

240.13a-13].  

SIXTH CLAIM FOR RELIEF 

False Certifications: Exchange Act Rule 13a-14 

122. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

123. As a result of the conduct alleged herein, Drexler falsely certified that 

MusclePharm’s quarterly and annual reports (i) did not contain any untrue statement 

of a material fact or omit to state a material fact necessary to make the statements 

made, in light of the circumstances under which such statements were made, not 

misleading and (ii) that he designed and evaluated the effectiveness of the registrant’s 

ICFR and DCP. 

124.  By virtue of the foregoing, Drexler, directly or indirectly, violated and, 

unless restrained and enjoined, will again violate Exchange Act Rule 13a-14 [17 

C.F.C. § 240.13a-14]. 

SEVENTH CLAIM FOR RELIEF 

Reporting Controls: Aiding and Abetting MusclePharm’s Violations of 

Exchange Act Rule 13a-15(a) 

125. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

126. MusclePharm, which is an issuer of securities pursuant to Section 12 of 

the Exchange Act and which files annual reports with the SEC pursuant to Section 

13(a) of the Exchange Act, failed to maintain required disclosure controls and 

procedures and internal control over financial reporting in violation of Rule 13a-15(a) 

of the Exchange Act. 

127. As a result of the conduct alleged herein, Drexler aided and abetted 

MusclePharm’s violations of Rule 13a-15(a) of the Exchange Act by knowingly or 

recklessly providing substantial assistance to MusclePharm. 

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COMPLAINT 29  
 

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128.  By reason of the foregoing, Drexler, directly or indirectly, aided and 

abetted and, unless restrained and enjoined, will again aid and abet violations of 

Exchange Act Rule 13a-15(a) [17 C.F.R. § 240.13a-15(a)]. 

EIGHTH CLAIM FOR RELIEF 

Reporting Controls: Exchange Act Rules 13a-15(b) and 13a-15(c) 

129. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

130. As a result of the conduct alleged herein, Drexler, violated Rules 13a-

15(b) and 13a-15(c) of the Exchange Act by failing to evaluate the effectiveness of 

MusclePharm’s ICFR and DCP. 

131.  By reason of the foregoing, Drexler, directly or indirectly, violated and, 

unless restrained and enjoined, will again violate Rules 13a-15(b) and 13a-15(c) of 

the Exchange Act [17 C.F.R. §§ 240.13a-15(b) and 240.13a-15(c)]. 

NINTH CLAIM FOR RELIEF 

Internal Accounting Controls: Aiding and Abetting MusclePharm’s Violation of 

Section 13(b)(2)(B) of the Exchange Act 

132.  The SEC realleges and incorporates by reference paragraphs 1 through 

103 as though fully set forth herein. 

133. MusclePharm failed to devise and maintain a system of internal 

accounting controls sufficient to provide reasonable assurances that transactions were 

recorded as necessary to permit preparation of financial statements in conformity 

with GAAP and any other criteria applicable to such statements in violation of 

Section 13(b)(2)(B) of the Exchange Act. 

134. As a result of the conduct alleged herein, Drexler aided and abetted 

MusclePharm’s violation of Section 13(b)(2)(B) of the Exchange Act by knowingly 

or recklessly providing substantial assistance to MusclePharm.  

135. By reason of the foregoing, Drexler, directly or indirectly, aided and 

abetted and, unless restrained and enjoined, will again aid and abet violations of 

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COMPLAINT 30  
 

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Section 13(b)(2)(B) of the Exchange Act [15 U.S.C. § 78m(b)(2)(B)]. 

TENTH CLAIM FOR RELIEF 

Proxy Disclosures: Violation of Section 14(a) of the Exchange Act 

and Rules 14a-3 and 14a-9 Thereunder 

136. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as through fully set forth herein. 

137. As a result of the conduct alleged herein, Drexler, directly or indirectly, 

by use of mails, or the means of instrumentalities or interstate commerce or any 

facility of a national securities exchange, solicited proxies without furnishing each 

person solicited a proxy statement containing the information specified by the proxy 

rules, and used proxy statements containing statements which, at the time and in light 

of the circumstances under which they are made, were false or misleading with 

respect to a material fact, or omitted to state material facts necessary to make the 

statement therein not misleading or necessary to correct any statement in any earlier 

communication with respect to the solicitation of a proxy for the same meeting or 

subject matter which has become false or misleading.  

138. By reason of the foregoing, Drexler violated and, unless restrained and 

enjoined, will again violate Section 14(a) of the Exchange Act [15 U.S.C. § 78n(a)] 

and Rules 14a-3 and 14a-9 thereunder [17 C.F.R. §§ 240.14a-3 and 240.14a-9]. 

ELEVENTH CLAIM FOR RELIEF 

Clawback: SOX Section 304(a) 

139. The SEC realleges and incorporates by reference paragraphs 1 through 

103 as through fully set forth herein.  

140.  By virtue of the foregoing, MusclePharm filed reports that were in 

material non-compliance with its financial reporting requirements under the federal 

securities laws from April 2, 2018, when MusclePharm’s Form 10-K for year-end 

2017 was filed until November 14, 2018, when MusclePharm’s Form 10-Q for the 

third quarter of 2018 was filed. MusclePharm’s material non-compliance with its 

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COMPLAINT 31  
 

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financial reporting requirements resulting from misconduct that required the company 

to prepare accounting restatements for its financial statements for 2017 and the first 

three quarters of 2018. 

141. Drexler received or obtained, during the statutory time periods 

established by SOX, bonuses, incentives, and/or equity-based compensation which he 

failed to reimburse to MusclePharm. 

142. The SEC has not exempted Drexler, pursuant to Section 304(b) of SOX, 

from its application under Section 304(a). 

143. By reason of the foregoing, Drexler violated and, unless ordered to 

comply will continue to violate, Section 304(a) of SOX [15 U.S.C. § 7243(a)].   

RELIEF SOUGHT 

WHEREFORE, the SEC respectfully requests that this Court: 

I. 

Find that Drexler committed the violations alleged in this Complaint; 

II. 

Enter an injunction, in a form consistent with Rule 65 of the Federal Rules of 

Civil Procedure, permanently restraining and enjoining Drexler from violating, 

directly or indirectly, the laws and rules he is alleged to have violated in this 

Complaint;  

III. 

Order Drexler to pay civil money penalties pursuant to Section 20(d) of the 

Securities Act [15 U.S.C. § 77t(d)] and Section 21(d)(3) of the Exchange Act [15 

U.S.C. § 78u(d)(3)];  

IV. 

Order Drexler to reimburse MusclePharm as required by SOX Section 304(a) 

[15 U.S.C. § 7243(a)].  

V. 

Order, pursuant to the Court’s equitable powers, Section 20(e) of the Securities 

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COMPLAINT 32  
 

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Act [15 U.S.C. § 77t(e)], and Section 21(d)(2) of the Exchange Act [15 U.S.C. § 

78u(d)(2)], that Drexler is prohibited, following the date of entry of the order, from 

acting as an officer or director of any issuer that has a class of securities registered 

pursuant to Section 12 of the Exchange Act [15 U.S.C. § 78l] or that is required to 

file reports pursuant to Section 15(d) of the Exchange Act [15 U.S.C. § 78o(d)].  

VI. 

Grant such other and further relief as this Court may deem just and proper. 

JURY DEMAND 

The SEC demands a trial by jury on all claims so triable. 

 

Respectfully submitted, June 27, 2023. 

 
/s/ Daniel Blau 
Daniel Blau 
Zachary T. Carlyle 
Sharan E. Lieberman 
Attorneys for Plaintiff 
Securities and Exchange Commission  

 
 

 

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