Wednesday, 1 March 2017
Last updated 17 hours ago
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."