Securities Law Blog

What do a 1963 Corvette Stingray, a home theater and bronze statues have in common? They were just a few of the extravagant purchases bought with proceeds from a $47 million offering fraud and Ponzi scheme allegedly operated by John Scott Clark and his two online payday loan companies.

According to the complaint filed by the Securities and Exchange Commission (SEC) in the U.S. District Court for the District of Utah, Clark and his two companies, Impact Cash LLC and Impact Payment Systems LLC, raised funds from investors for the stated purposes of funding payday loans and other aspects of the companies’ operations. Investors were reportedly told to expect annual returns of 80 percent on their investments and that their money would be kept in separate bank accounts.

Between March 2006 to September 2010, Clark allegedly lured more than 120 investors into his Ponzi scheme through word-of-mouth referrals, by attending trade shows, attending payday loan conferences and paying salespeople to locate potential investors. According to the SEC’s complaint, Impact never distributed a private placement memorandum or any other document disclosing the nature of the investment or the risks involved to investors. Clark allegedly altered account statements provided to him by Impact’s accounting department to create artificially high annual rates of return varying from 30 percent to more than 200 percent.

Clark and Impact are being charged with fraudulently selling unregistered securities. The SEC obtained a court order freezing the assets of Impact and their owner, and a receiver has been appointed to preserve assets for the benefit of investors