SEC Accuses Utah Company Of Running $28 Million Ponzi Scheme
The Securities and Exchange Commission announced it had obtained an asset freeze and halted an alleged $28 million Utah-based Ponzi scheme that may have duped over 250 investors nationwide. Marquis Properties, LLC, its President/CEO Chad R. Deucher, and Vice President Richard Clatfelter, were named in a January 19, 2016 complaint alleging multiple violations of federal securities laws. The Commission is seeking injunctive relief, imposition of civil monetary penalties, prejudgment interest, and disgorgement of ill-gotten gains.
According to the Commission's complaint, Marquis held itself out as an experienced property-management company that specialized in acquiring and managing high-quality cash-flowing properties. The company solicited potential investors by representing that it would manage various properties located in Indiana, Missouri, and Ohio, collect monthly rental income, and distribute a return ranging from 8% to 12% annually as passive investment income. Potential investors were told that the various investments offered by Marquis were safe and risk-free because investment returns would be secured by a first deed of trust on property and that investments would be "over-capitalized." From April 2010 to June 2015, Marquis raised at least $28.2 million from hundreds of investors.
However, the Commission alleged that Marquis operated a classic Ponzi scheme by using new investor funds to pay purported returns to existing investors. Rather than purchase real estate with investor funds, as had been represented to investors, the Commission charged that Marquis had diverted investor funds to pay returns to existing investors and to pay personal expenses including the transfer of nearly $400,000 to Mr. Deucher's wife. While Marquis stopped paying returns to investors in June 2015, the Commission's complaint alleges that Mr. Deucher had recently represented to an investor that repayment would begin shortly.
A copy of the Complaint is below: