$6 Million Ponzi Scheme|Unraveled, SEC Says

INDIANAPOLIS (CN) – An Indiana man ran a Ponzi scheme that defrauded people of $6 million they took from their IRAs, the SEC claims in court.
     The SEC sued John K. Marcum, 49, of Noblesville, and his companies Guaranty Reserves Trust LLC and Marcum Companies LLC, in Federal Court.
     “Since 2010, John K. Marcum has raised more than $6 million from at least 37 individuals by selling them investments in Guaranty Reserves Trust, LLC (‘GRT’),” the SEC says in the lawsuit. “Marcum told these individuals that their investment principal was guaranteed, and would never be at risk, because it was secured by valuable assets. Marcum also promised his investors that he would use their money to earn strong returns by day-trading in stocks. And Marcum regularly provided his investors with account statements showing that he had used their money to achieve annual returns of more than twenty percent (20%), with no monthly losses.
     “In reality, Marcum did very little actual trading, and when he did, he suffered losses. Instead of day-trading, Marcum used his investors’ money as collateral for a line of credit. Marcum used this line of credit to finance several start-up businesses, including a bridal store, a soul food restaurant and bounty hunter reality television show. Marcum also used investor money to finance his lifestyle, which included luxury car payments, airline tickets, expensive meals, and hotel stays.
     “Marcum’s scheme began to unravel in mid-2013, when certain of his investors began demanding distributions. Marcum could not comply, because virtually all of his investors’ money is gone. However, Marcum has attempted to reassure his investors that their investment is secure by producing fabricated documents showing that he has purported net worth of nearly $300 million. In fact, Marcum is nearly broke, and his accounts contain less than $2,000.
     “Eventually, Marcum admitted to certain investors that he had lied to them about the use of their funds and the returns they were earning. Marcum asked these investors to allow him three more years to pay back their money using contributions from new investors. Marcum has also named certain investors as beneficiaries on his life insurance policies, suggesting that he would be willing to commit suicide so that they could recover their losses.
     “The Commission brings this action to enjoin Marcum’s illegal activities, to prevent him from causing any further harm to his investors, and to stop him from ensnaring new victims in his fraudulent schemes. The Commission also seeks an award of disgorgement, prejudgment interest and civil penalties.”

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