The SEC is charging ex-University of Georgia football coach Jim Donnan over his alleged involvement in an $80M Ponzi scam that defrauded nearly 100 investors. Donnan is a College Football Hall of Famer who also coached at Marshall University and has worked as a sports commentator. He, along with Gregory Crabtree, is charged with violations related to the federal securities laws’ antifraud and registration provisions.
According to the SEC, business partners Donnan and Crabtree used GLC Limited to operate the scam. Investors were promised return rates of 50-380%. They were told that the company was into wholesale liquidation and made money by purchasing leftover merchandise from large retailers and reselling what was damaged, discontinued, or had been returned to discount retailers. In truth, contends the Commission, just $12 million of the $80 million from investors was used to buy the merchandise and a lot of what GLC bought ended up dumped in warehouses in Ohio and West Virginia. The rest of the money went toward either paying bogus returns to earlier investors or were used by the two men for other purposes. By the time the Ponzi scam collapsed, the SEC says that Donnan had taken over $7 million from GLC, while Crabtree allegedly misappropriated about $1.08 million of investors’ money.
The SEC’s charges come just a few months after Donnan agreed to a proposed bankruptcy settlement with GLC and investors. He owes the retail liquidation company over $13 million and these investors contended that he owes them approximately $27 million. The ex-college coach has consented to pay back 80% of the losses these clients sustained. Meantime, GLC’s owners are blaming Donnan and his Ponzi scam for the company having to file for bankruptcy. Donnan, too, has sought bankruptcy protection.
The two men are accused of offering and selling short-term investments (ranging from 2 months to 12 months) with a purported high-yield. Investors were to get returns either monthly, quarterly, or as a one-time payment.
The regulator says that the Ponzi scam ran from August 2007 until its demise in October 2010. Donnan allegedly approached contacts he knew through his work as a commentator and coach to recruit investors. In a release announcing the charges, the SE, quotes him as telling one former player that he was doing this for him, his “son.” The player went on to invest $800,000. Donnan is also accused of telling investors that he too was investing in the merchandise deals and that other well-known football coaches had profited from doing the same.
Unfortunately, there are people who will not hesitate to use their personal or business or social relationship with you to get you to invest in a financial scam. It can be devastating to discover that someone that you personally know violated your trust to defraud you.
Read the SEC Complaint (PDF)
SEC Charges College Football Hall of Fame Coach in $80 Million Ponzi Scheme, SEC, August 16, 2012
More Blog Posts:
SEC Charges New York-Based Fund Manager and His Two Financial Firms Over Alleged $11M Ponzi Scheme, Stockbroker Fraud Blog, May 28, 2012
SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts, Stockbroker Fraud Blog, December 20, 2011
Goldman Sachs Execution and Clearing Must Pay $20.5M Arbitration Award in Bayou Ponzi Scam, Upholds 2nd Circuit, Institutional Investor Securities Blog, July 14, 2012
Our Ponzi fraud attorneys are here to help investors recoup their losses. Contact Shepherd Smith Edwards and Kantas, LTD, LLP today.