SEC Charges Indiana Man In Ponzi Scheme
Marcum, of Noblesville, Indiana, is the principal of Guaranty Reserves Trust, and was once a broker. He’s also been an investment adviser registered with the SEC. In 2010, he began presenting himself to potential marks as an “experienced money manager” worth $300 million. He told one investor that he’d done so well for himself that he wanted to “give back.” He persuaded these people to give him money in exchange for promissory notes that he characterized as “asset-backed” and “secured.” They were co-signed by the investors and Marcum, and deposited in the investors’ IRA accounts.
Marcum raised at least $6 million from at least 37 individuals in six different states. He pooled the money in bank and brokerage accounts controlled by him. Although he sent out elaborate account statement showing favorable rates of return, in reality he did very little trading, and when he did he almost always lost money.
Instead, he used a significant portion of the funds under his control to open a line of credit at Merrill Lynch. He used cash advances from the line of credit to create startup businesses, including a bridal store, a bounty hunter reality television show, and, in an interesting synergy, a soul food restaurant owned and operated by the bounty hunters. He then raised yet more money from his investors, and used it to pay off the line of credit.
He also used their money for personal expenses, including cars—a Mercedes, a Jeep, and a Ford—and entertainment at sports events and nightclubs.
The scheme began to collapse in 2013, when several individuals submitted redemption requests. He refused to honor the requests. He finally agreed to a conference call with three investors. In the course of it, he admitted that he was unable to pay back the money, that he had misappropriated the funds they had entrusted to him, and that he’d been falsifying account statements. He then begged for more time, offering to name them as beneficiaries of his life insurance policies. Bizarrely, he went to far as to explain that if they’d only wait two more years, they’d benefit if he committed suicide. In the wake of the call, he actually did name several investors as beneficiaries of those policies.
Though the SEC’s complaint does not specifically say so, it seems likely that one or more of those investors contacted the agency.
The SEC seeks disgorgement of Marcum’s ill-gotten gains, though that appears to be a mere formality, as he’s flat broke, with only about $2000 in his bank and brokerage accounts.
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