Investment Losses and Banking & Finance and Investing and Investment Brokers and Securities fraud and SEC

SEC charges Noblesville man in $6M investment scheme

August 26, 2013

The Securities and Exchange Commission on Monday charged a Noblesville man with defrauding investors in a scheme that targeted retirement savings.

John K. Marcum, 49, portrayed himself as a trader and asset manager to raise more than $6 million from at least 37 investors in six states through his company, Guaranty Reserves Trust, the SEC alleges.

Starting in 2010, Marcum helped investors set up individual retirement accounts and gained control over their retirement assets, saying he would earn them big returns by day-trading in stocks while guaranteeing the safety of their principal investment.  However, the SEC said, Marcum did little actual trading and lost money when he did.

According to the charges, Marcum gave investors false account statements showing they were earning annual returns of more than 20 percent while he was using the funds to pay for a "luxurious personal lifestyle and finance several start-up companies."

The SEC said it has obtained an emergency court order to freeze the assets of Marcum and his company.

“Marcum tricked investors into putting their retirement nest eggs in his hands by portraying himself as a talented trader who could earn high returns while eliminating the risk of loss,” said Timothy L. Warren, acting director of the SEC's Chicago Regional Office. “Marcum tried to carry on his charade of success even after he squandered nearly all of the funds from investors.”

The SEC said Marcum used $3 million as collateral for a line of credit at the brokerage firm where he previously worked to to fund unprofitable ventures such as a bridal store, a bounty hunter reality TV show, and a soul food restaurant operated by the bounty hunters. None of the investors knew their money was being used on such ventures.

Investigators also accuse Marcum of spending a half-million dollars to pay personal expenses including airline tickets, luxury car payments, hotel stays, sports and event tickets, and tabs at a Hollywood nightclub.

According to the SEC’s complaint, Marcum had a phone conversation with three investors in June and admitted that he had misappropriated investor funds and was unable to pay investors back. During this call, Marcum begged the investors for more time to recover their money. 

He offered to name them as beneficiaries on his life insurance policies, which he claimed included a “suicide clause” imposing a two-year waiting period for benefits. He suggested that if he was unsuccessful in returning their money, he would commit suicide to guarantee that they would eventually be repaid.

Marcum could not be reached for comment Monday.


 

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