Securities and Exchange Commission Reportedly Halts “Ponzi-like” Scheme

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On June 28, 2012, the Securities and Exchange Commission (“SEC”) announced that it had obtained an emergency court order to stop a “Ponzi-like scheme” operated by Small Business Capital Corp., and its alleged principal Mark Feathers.  A Ponzi scheme is a fraudulent scheme in which the investors’ return on investment is paid from new investor money, not from the actual return on legitimate investment activities or business operations.  According to the SEC press release Mr. Feathers raised a total of $42 million from investors by offering and selling securities of two funds – Investors Prime Fund, LLC and SBC Portfolio Fund LLC.  According to the SEC, Mr. Feathers reportedly told investors that the funds would invest in mortgage securities from which he promised as many as 400 investors a return on investment of 7.5% or more per year.

According to the SEC, the return on investment came in part from profits and in part from new investor money, thus making it a “Ponzi-like scheme.”  The SEC further alleges that Mr. Feathers caused money to be transferred from the funds to his company Small Business Capital to pay expenses, which included substantial payments to Mr. Feathers personally.  The SEC further alleges that Mr. Feathers manipulated profits by causing one of his funds to “sell” mortgage securities to the other fund at inflated prices in order to generate “profits”.  These profits, according to the SEC, were used to pay Small Business Capital management fees of more than $575,000.

The law firm of Krause, Kalfayan, Benink & Slavens, LLP is investigating.  KKBS has extensive experience representing investors who invested in Ponzi schemes, including actions against investment advisers who conducted “due diligence” and recommended such investments to their clients.

For more information or to schedule a free consultation, please contact attorney Vincent D. Slavens @ 619-232-0331 or vslavens@kkbs-law.com.