Greg Barnes of Inside Carolina initially broke the scandal with ESPN following closely behind. On July 15, 2010, ESPN reported that the NCAA interviewed several North Carolina football players over alleged gifts, extra benefits, and sports agent involvement. Reportedly, the investigation began after North Carolina defensive tackle Marvin Austin made a post on Twitter on May 29 that year, and the post contained a reference to a nightclub in Miami in which a sports agent's party had taken place two months earlier. The university later suspended Austin and over ten other football players from the team. On October 11, 2010, Austin was expelled from the football team, and the NCAA declared wide receiver Greg Little and defensive end Robert Quinn "permanently ineligible" due to receiving improper benefits.
On August 26, 2010, the NCAA began a separate investigation of North Carolina football that involved possible academic fraud involving a tutor in the university's academic support program. The tutor was later identified as Jennifer Wiley (as of 2013 known as Jennifer Wiley Thompson due to marriage). Another source familiar with the investigation said that Wiley was accused of "inappropriate help on papers that football players were required to write for classes." However, Baddour said on September 24 that Wiley declined to cooperate with the NCAA.
Because the university felt that the NCAA investigation was extremely embarrassing to the university's reputation, North Carolina fired football head coach Butch Davis on July 27, 2011. The next day, athletic director Dick Baddour announced that he would resign and allow chancellor Holden Thorp to hire a football head coach.
On March 12, 2012, the NCAA issued formal sanctions against North Carolina football: a postseason ban for 2012, reductions of 15 scholarships, and 3 years of probation. The NCAA found North Carolina guilty of multiple infractions, including academic fraud and failure to monitor the football program. However, the NCAA did not find anything extending to lack of institutional control, explaining that the university "educated its tutors regarding academic improprieties and its coaches regarding outside athletically related income ... self-discovered the academic fraud and took decisive action ... cooperated fully, is not a repeat violator and ... exhibited appropriate control over its athletics program." In November 2013, the university sent a letter of disassociation to Austin, Little, and Quinn.