The Securities and Exchange Commission filed civil fraud charges against an Indiana man, charging him with operating a $6 million Ponzi scheme that targeted retirement funds and was used to fund several failed startup businesses - including a bounty hunter reality show. John K. Marcum, 49, of Noblesville, Indiana, was charged with multiple violations of federal securities laws after he was recorded telling several investors that his scheme was on the verge of collapse. Marcum also told those investors that he was waiting for a "suicide clause" to take effect after a two-year waiting period in which he would kill himself in order to see that investors were repaid. The SEC is seeking disgorgement of all ill-gotten gains, as well as injunctive relief and civil monetary penalties.
Marcum operated Guaranty Reserves Trust LLC ("Guaranty"), touting himself as an experienced trader and asset manager. Beginning in 2010, Marcum began soliciting investors, promising annual returns of nearly 20% while guaranteeing the safety of the underlying principal. Marcum specifically targeted investors with retirement funds, convincing them to roll-over their existing IRA accounts into newly-established self-directed IRA accounts in which Marcum was given access. Investors were told that Marcum would invest only in popular widely-held stocks, and were provided with regular account statements showing the promised growth in their accounts. Ultimately, Marcum raised more than $6 million from investors.
However, Marcum was not the savvy investor he held himself out to be. Rather, his trading skills resulted in losses of nearly $1 million in investor funds. Instead, Marcum used incoming investor funds to make interest payments and principal redemptions to existing investors - a classic hallmark of a Ponzi scheme. Of the remainder of investor funds that were not lost in trading or paid out to existing investors, Marcum financed a lavish lifestyle that included airline tickets, luxury car payments, hotel stays, sports and event tickets, and tabs at a Hollywood nightclub. Marcum also unsuccessfully attempted to finance several start-up businesses, including a bridal store, a bounty hunter reality television show, and even a soul food restaurant operated by the bounty hunters. The SEC indicated that Marcumhad less than $2,000 of investor funds remaining.
As Marcum's scheme began to unravel in mid-2013, he began falling behind on payment obligations to investors. During a June 2013 conference call with several investors, which was secretly recorded, Marcum apparently admitted to malfeasance with investor funds. In an attempt to placate the investors, Marcum offered to name them as beneficiaries on an existing life insurance policy and, after the expiration of a two-year "suicide clause", offered to kill himself to make the investors whole.