Ponzi Scheme in Indianapolis

Ponzi Scheme in Indianapolis

The Securities and Exchange Commission (SEC) filed charges against Indianapolis resident, John K. Marcum, and his company Guaranty Reserves Trust, for defrauding investors in a Ponzi scheme that specifically targeted retirement accounts. The SEC was also able to obtain an emergency freeze on all the assets of the Nobleseville Ind., resident.

According to the complaint, filed in Indianapolis, Marcum touted himself as a successful trader and an asset manager to people who were looking to improve their retirement prospects. Through his schemes he was able to raise $6 million through promissory notes issued by his company Guaranty Reserves Trust.

The SEC alleges that Marcum assured investors that he could safely and securely grow their investments through widely held public stocks and that their principle was never at risk. Many investors were lured in by Marcum’s promises of an annual return of 10 – 20% believing that it was a zero risk investment since Marcum and his company had “guaranteed” the principal. On at least one occasion Marcum falsely told an investor that her funds were federally insured.

Marcum, in reality, has done very little trading and in what little trading he has been involved in has almost always lost money. During the duration of the Ponzi scheme Marcum traded away and lost over $900,000 of investment money. Throughout his scheme however, Marcum provided investors with falsified account statements which indicated to investors that they were making handsome profits of up to 20% on their investments. Meanwhile Marcum was investing the money in a number of failed startups or business that are not generating any revenue including a bridal store, a bounty hunter television program, and a restaurant owned by bounty hunters. None of these businesses appear to be successful and none of Marcum’s clients were aware of where their money was going.

Using the investor money as collateral, Marcum was able to secure a $3 million line of credit from which he took frequent advances to either fund startups that caught his fancy or to pay for his extravagant lifestyle. The money spent on startups is close to $1.4 million while at least $500,000 was spent on the lavish living of the alleged conman who also used more than a half-million dollars to pay personal expenses accrued on credit card bills, including airline tickets, luxury car payments, hotel stays, sports and event tickets, and tabs at a Hollywood nightclub.

“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. Marcum tried to carry on his charade of success even after he squandered nearly all of the funds from investors.” said Timothy L. Warren, Acting Director of the Chicago Regional Office of the SEC.

The SEC complaint alleges that Marcum started his scheme in 2010. Under the scheme investors would give Marcum control of their assets either by rolling their existing IRA accounts into the newly-established self-directed IRA accounts or by transferring their taxable assets directly to brokerage accounts that Marcum controlled. Promissory notes were also signed by investors, and cosigned by Marcum, before being placed into the IRA.

Conmen have a way of tapping into the desire to be more secure and have a brighter future, making it all the more important to know who you are dealing with at all times. The importance of due diligence cannot be stressed enough, especially when dealing with important assets like retirement accounts and IRA’s. Anyone with a silver tongue can convince an unwary investor to turn over control and then spend the money however they see fit. Awareness and diligence are the only weapons against being fooled.

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