SEC: Alleged Utah Fraudster Ripped Off Hedge Funds

Mar 30 2011 | 10:18am ET

A Utah man has been accused of running a $47 million Ponzi scheme that ensnared three hedge fund managers just before imploding.

The Securities and Exchange Commission sued John Scott Clark and two of his companies yesterday, alleging that he lied to investors and misappropriated funds. Of the $47 million raised between March 2006 and September, just $4 million remains. That's in spite of the fact that Clark won some of his biggest hauls in the latter month, netting "investments" from a trio of "low-level hedge funds" from New York and San Francisco, the regulator said.

Those hedge funds invested some $15 million in Clark's Impact Cash and Impact Payment Systems, supposedly to fund payday loans. Clark allegedly promised the unidentified hedge fund managers 55% annual returns.

Other investors got even richer promises, the SEC said, with projected returns of up to 80%.

"Clark recruited new investors through referrals from earlier investors who thought the Ponzi payments they received were actual returns on their investments and sought to share the lucrative opportunity with family and business associates," Ken Israel, head of the SEC's Salt Lake City office, said.

But Clark didn't just make Ponzi scheme payments, the SEC said: He lavished investor money on himself, buying expensive cars and snowmobiles, a $25,000 home theater and what the regulator called "bad art."

Clark promised his 120 investors that he would keep their money in separate accounts, and poured it all into one account that he used as a personal kitty, the SEC alleges. Frequently, he didn't even provide financial statements to investors, and when he did they were bogus.

"He's what we would call shiny," the SEC's Thomas Melton said. "He looks like a salesman. You might buy a snowmobile from him."


In Depth

Why Ponzi Schemes Work: An In-Depth Look At The Allen Stanford Fraud

Dec 21 2014 | 10:30am ET

Texan Allen Stanford first appeared on the radars of financial regulators in 1997...

Lifestyle

Hedgie Funds US Squash Program

Dec 24 2014 | 8:46am ET

Squash, anyone?

Guest Contributor

EidoSearch’s Top Three Market Projections For 2015

Dec 23 2014 | 4:03am ET

It is that time of year again when prognosticators make their big market calls for...

 

Sponsored Content

Editor's Note

    Guidelines for Guest Articles

    Oct 22 2014 | 9:46am ET

    We are always looking for guest articles from hedge fund managers and buy-side firms.

    If you are interested in submitting a contributed piece for possible publication on FINalternatives, please take a look at the specs. Read more…

 

Futures Magazine

December 2014 Cover

Futures 2014 person of the year

Jeff Sprecher was simply looking for a platform to trade energies when launching ICE 14 years ago but it has grown to reach the pinnacle of both the listed futures and equities world.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.