SEC Accuses Online Payday Loan Firms in $47M Ponzi Scheme
Two Utah online payday loan companies and their owner, John Scott Clark, were accused of running a $47 million Ponzi scheme by the Securities and Exchange Commission (SEC) in a news release. The SEC said that the assets of the two companies, Impact Cash, LLC and Impact Payment Systems, LLC are being frozen. In the complaint, the SEC said that some 120 investors were bilked between March 2006 and September 2010. According to Market Watch, there were three gullible hedge fund managers in New York and San Francisco that took the bait and dropped $15 million in the Utah Ponzi scheme. This is funny in so many ways because it is usually the Wall Street types who pull the wool over the eyes of investors. It only seems right that these hedge fund managers got suckered in with the pie in the sky promises, dumping $15 million in only months before the scheme came apart.
Investors in the companies were promised astronomical returns of 80% and told that their money would be used to fund payday loans and run company operations. Instead their funds were comingled and used to make unauthorized investments, pay fictitious profits to earlier investors and finance a lavish lifestyle. Mr. Clark purchased a fully restored 1963 Corvette Stingray along with many other expensive automobiles, snowmobiles, a $25,000 home theater, bronze statutes and other art for his personal use.
Account statements to investors were altered to create artificially high annualized returns that ranged from 30% to 200%. In addition to the asset freeze, the Sec is seeking disgorgement, prejudgment interest and financial penalties from Mr. Clark and the two Impact companies.