The Securities and Exchange Commission has secured an emergency order to stop a hedge fund scam run by ex-marine Clayton A. Cohn and his Market Action Advisors, a hedge fund management firm that is registered in Illinois. The regulator contends that Cohn pretended to be a be a successful trader and purposely targeted current military, other veterans, friends, relatives, and other unsophisticated investors, defrauding them of nearly $1.8 million.
Per the SEC, Cohn lied about his trader track record, the hedge fund’s performance, his intended use of investors’ proceeds, and his own stake in the fund. He invested less than 50% of investors’ funds, while using over $400,000 for personal spending, including a luxury vehicle, a mansion in Hollywood, and expensive visits to fancy nightclubs. To conceal his fraud and keep collecting investor money, Cohn allegedly created bogus hedge fund accounts statements reporting yearly returns greater than 200%.
The Commission filed its Illinois hedge fund fraud lawsuit in federal court in Chicago. The regulator says that Cohn ran Market Action Capital Management, which is a hedge fund, via Market Action Advisors. The regulator is charging him and his firm with federal securities law antifraud provision violations. The SEC wants permanent injunctions, financial penalties, and disgorgement of ill-gotten gains.
Affinity Fraud
Cohn runs the Veterans Financial Education Network (VFEN), which is supposedly a charity that teaches veterans about managing their funds. In VFEN press releases, Cohn made sure to say he is a former Marine and recommended that veterans select a money manager they can trust. On the VFEN website, Cohn is described as a fund manager who has overseen millions of dollars.
The term “affinity fraud” is used to describe investment schemes targeting members of a certain identifiable group, such as a religious community, ethnic circles, senior investors, alumni members, or professional groups. This type of fraud takes advantage of the friendship/trust/connection in groups of people with common ties.
To speak with an affinity fraud lawyer, contact Shepherd Smith Edwards and Kantas, LTD, LLP today.
SEC Halts Ex-Marine’s Hedge Fund Fraud Targeting Fellow Military, SEC, August 6, 2013
Read the Complaint (PDF)
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