by Brian Mahany
The payday loan industry has never enjoyed a great reputation. While special counsel to the Maine Senate, I helped lawmakers pass legislation eliminating the practice in that state. It comes as no surprise to me that the SEC has accused a payday lender of running a fraud and Ponzi scheme.
The SEC has charged John Clark and Impact Cash LLC with bilking investors out of $47 million between March 2006 and September 2010. Clark told investors he needed the money to fund payday loans to others. Instead, government lawyers say he diverted millions for personal use and to fund other ventures. Some of the money was also used to pay prior investors, the classic badge of a Ponzi scheme.
According to court documents, investors were promised 80% annual returns. Apparently investors received no private placement memorandum, no audited financial statements and in most cases, not even investment documentation. High annual returns coupled with no documentation or financials should be huge red flags to potential investors.
Prosecutors say that little, if any, of the investor money went to actually make loans. So where did the money go?
The SEC says that Clark purchased 3 top model Mercedes Benz vehicles and a restored 1963 Corvette. When not buying cars, he spent the money in other lavish ways. Some of the money went to other ventures including a real estate firm.
The charges brought by the SEC are civil. The government hopes to have the court to order Clark to return investor’s money. Whether he can is quite doubtful.
As in all Ponzi scheme cases, it is often very difficult to get back all the money taken. Unless investors relied on an audited financial statement (there were none) or purchased from a broker or adviser (doubtful), victims must rely on the government to recoup their losses. In this case, there does not appear any third parties that can independently be held responsible for the losses.
Mahany & Ertl is a boutique law firm concentrating in investment fraud cases. Our securities lawyers can help you recover your lost investment. Often cases can be handled on a contingent fee basis meaning no legal fees unless we win your case. We welcome cases against stockbrokers and investment advisors as well as “gatekeeper” suits against auditing firms. Contact Brian Mahany today at (414) 704-6731 for a no nonsense evaluation of your case.
Mahany & Ertl, LLC. Milwaukee, Wisconsin; Detroit, Michigan & Portland, Maine. Services provided nationwide.