Concert promoter admits gambling away investors' money

The owner of a Sioux Falls-based record company admitted Monday to gambling away more than $1 million in investment funds.

Madhouse Entertainment founder Michael Zimmer was arrested in January on eight counts of federal wire fraud. He pleaded guilty to one count.

According to a factual basis statement, Zimmer approached a handful of people about investing in his company to help him promote rap concerts. He promised potential investors a return on their investment.

Most of the money invested, however, was gambled away by Zimmer, according to court records. Zimmer used the money to gamble in Las Vegas, Atlantic City, N.J., and Larchwood, Iowa.

Even as Zimmer was losing money, he sought out additional investors with promises of concerts that never occurred, court records say.

Zimmer was accused of stealing more than $1.1 million from investors since July 2014. No civil lawsuits have been filed in South Dakota against him or his company to recoup the lost funds.

Jayson Weihs of The Collective Efforts Union said he met with Zimmer after the concert promoter approached a friend of his about investing in Madhouse Entertainment.

Weihs, whose group is bringing B.o.B to The District, said there were concerns when the show was announced that if Zimmer were involved it would get canceled.

“I’m just glad to not have associated myself with something that came back in a negative way,” he said. “Doing music and getting your name out in a positive way is already tough enough.”

Erika Newtown, executive director of the event facilities department for the city of Sioux City, said her office had one unsuccessful interaction with Zimmer. The record company owner attempted to bring B.o.B. to the Tyson Events Center but canceled the concert about a week before the performance.

“A lot of money was spent on advertising the show, but  (Zimmer) canceled due to lack of tickets,” Newtown said.

Eric Larsen, general manager of the Sanford Sports Complex, said the Sanford Pentagon worked with Madhouse Entertainment to book a show featuring the artist Nelly on Oct. 11, 2014. The show did occur as scheduled, and the artist was paid, Larsen said.

Zimmer faces up to 20 years in federal prison during his sentencing hearing June 27.