August 26, 2013 / 10:23 PM / 6 years ago

SEC says Indiana man used Ponzi scheme to fund a reality TV show

(Reuters) - The Securities and Exchange Commission charged an Indiana man with running a $6 million Ponzi scheme that defrauded investors out of their retirement savings and used the money to invest in a bridal store, a bounty hunter reality television show, and a soul food restaurant owned by the bounty hunters.

A man walks past a doorway at the Fort Worth Regional Office of the Securities and Exchange Commission (SEC) in Fort Worth, Texas June 28, 2012. REUTERS/Mike Stone

The SEC on Monday said it obtained an emergency court order to freeze the assets of defendants John Marcum and his firm Guaranty Reserves Trust LLC.

Marcum, 49, of Noblesville, Indiana, was accused of deceiving at least 37 people into investing in promissory notes issued by his firm by promising double-digit annual returns with no risk to principal by day-trading in stocks.

“Marcum tricked investors into putting their retirement nest eggs in his hands by portraying himself as a talented trader who could earn high returns while eliminating the risk of loss,” said Timothy Warren, acting director of the SEC’s Chicago regional office.

The SEC said Marcum regularly gave clients account statements showing annualized returns of more than 20 percent with no monthly losses.

Instead, the regulator said he lost more than $900,000 on what little trading he conducted, and used the remaining funds to invest in start-up ventures and finance a lifestyle including Mercedes-Benz car payments, airline tickets, nightclub outlays, and charges to his former wife’s credit card.

The SEC said none of the start-ups appears profitable, and that Marcum “is nearly broke, and his accounts contain less than $2,000.” It said the scheme began to unravel in mid-2013 when Marcum became unable to meet some investors’ redemption demands.

According to the regulator, Marcum admitted misappropriating investor money during a June 18 conference call with three investors, which was recorded.

It said he also told investors during the call that his insurance policies had a two-year waiting period for a “suicide clause” to take effect, and that if he failed to return their money he would kill himself so they could be made whole.

A lawyer for Marcum did not immediately respond to a request for comment. Marcum could not immediately be located.

The lawsuit seeks a fine, the recovery of ill-gotten gains, and a permanent ban on further wrongdoing.

The case is SEC v. Marcum et al, U.S. District Court, Southern District of Indiana, No. 13-01361.

Reporting by Jonathan Stempel in New York; Editing by Leslie Adler

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