SALT LAKE CITY (CN) - A Ponzi operator who raised $47 million by offering 80 percent annual returns on an online payday loan business spent investors' money on hot cars, snowmobiles, a $25,000 stereo system and whatever else he liked, the SEC says.
The SEC sued John Scott Clark, 58, of Hyde Park, Utah, and his businesses, Impact Cash and Impact Payment Systems, in Federal Court.
Clark told his victims he would use their money "to purchase lists of borrowers that had a history of repaying payday loans and ... to fund payday loans for Impact customers," the SEC says.
But instead, "Clark used investors' funds for personal purposes and to make unauthorized investments, including a real estate company, a diabetes research company and an online products store," according to the complaint.
Clark paid one recruiter "between $500,000 and $600,000 over a four or five year period," the complaint states; others received 2 to 4 percent commissions.
Most victims received no documentation on their investment, the SEC said, and "Clark routinely altered investor account statements provided to him by Impact's accounting department, adjusting rates of return to create artificially high annual rates of return."
Concerns about Clark began to surface in fall 2009, as "investors experienced difficulty in obtaining account statements," the SEC said.
According to the complaint: "Clark began to spend lavishly. He bragged about purchasing multiple vehicles worth more than $100,000 each, including at lease three Mercedes Benzes and a 1962 restored Corvette. Clark installed a $25,000 home theater system in his home, purchased expensive furniture and bronze statuary, snowmobiles, and openly discussed giving large amounts of money to friends and family members."
He ignored investors' liquidation requests and "admitted to a family member and Impact investor to misappropriating investor funds, overpaying certain investors and compromising the company," the complaint states.
Clark's admission led investors to take action, and they discovered accounting discrepancies in Impact's books and records.
The SEC seeks disgorgement and penalties.