SAN JOSE (CN) – The SEC said it obtained an emergency court order to stop a $42 million Ponzi scheme that 48-year-old Los Altos resident Mark Feathers ran through his companies Small Business Capital Corp., Investors Prime Fund and SBC Portfolio Fund.
The SEC says in its federal complaint that Feathers and his Small Business Capital company raised $42 million by selling securities issued by his other two companies, alleged mortgage investment funds.
Feathers roped in more than 400 people by promising annual returns of 7.5 percent or more, but in typical Ponzi fashion, paid off old investors with new money, the SEC said.
The SEC claims that Feathers transferred more than $6 million from the funds to Small Business Capital, and to himself. He “did not tell investors that Small Business Capital’s ability to repay was uncertain and that it was only able to make the interest payments owed to the funds by borrowing more from them,” the SEC said in a statement announcing the lawsuit and the emergency order.
A federal judge on Thursday granted the request for an emergency order and set a hearing on the SEC’s request for a preliminary injunction for July 10.