The Securities and Exchange Commission has filed a motion against Clayton Cohn and his company MarketAction Advisors LLC, saying that he has been defrauding vets with a Ponzi-like scheme that used fraudulent documents and money from new investors to cover up huge losses and other illegal activity.
SEC details long list of blatant lies
According to the court filing, Cohn’s financial background consists of one semester at DePaul University, three weeks as a broker trainee, and an investment advisory service that promptly went under. In 2011 Cohn founded Marketaction Capital Management, and has since raised $1.78 million from 24 investors for his “multi-strategy hedge fund”.
Cohn targeted fellow veterans (he served in the Marines), family members, old friends, and people directed to his hedge fund by a fake charity that Cohn operated called the Veteran’s Financial Education Network. This charity would explain the importance of finding a money manager that was experienced and reputable, and then direct people to Cohn’s company.
Cohn’s marketing and investor relations collaterals contained a number of blatant lies, spelled out by the SEC. First, he claimed to have ‘skin in the game,’ meaning that his interests would be aligned with investors. Cohn told investors that he had put $1.5 million of his own money in the fund, but the SEC found that the real amount was at most $4000. He also said that the fund was regularly audited by a reputable outside accounting firm. “The Fund’s PPM identifies an Illinois-based accounting firm as the Fund’s auditor. But neither Cohn nor his companies retained the firm; the firm is unfamiliar with defendants,” the SEC wrote.
SEC departs from its usual dry summation: “The jig is up”
All of that, while illegal, would probably go ignored if investors were making money hand over fist, but of course nothing of the sort is happening. Cohn simply kept most of the money investors gave him for personal expenses. As for the rest, “Cohn has used less than half of the investor proceeds on the trading strategy described in his pitch to potential investors. He also invested a small amount of the investor proceeds in private equity-style investments in small enterprises,” the SEC explains. “Sadly, Cohn has lost every penny of these investments.”
His fraud began to fall apart when multiple investors asked for redemptions at the same time and Cohn refused, citing various liquidity problems. The SEC says he was trying to find new investors to cover the redemptions and keep fueling his con. In a rare departure from dry text, the SEC legal filing sums up the situation succinctly.
“The jig is just about up.”
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The Most Ridiculous Hedge Fund Scheme Ever Seen by ValueWalk.com
