Hall of Fame Coach Charged with $80 Million Ponzi Scheme by the SEC

On August 16th the Securities and Exchange Commission charged former Football Hall of Famer, Coach and sports commentator Jim Donnan with partaking and promoting in a $80 million ponzi scheme. The scheme was operated by GLC Limited, which was also going by the name of Global Liquidation Center. The president and co-owner of the company, Gregory Crabtree has also been charged in the SEC suit.

According to the claim, the company was supposedly a buyer and seller of leftover, discontinued, damaged or returned merchandised. The process was supposed to work by getting people to invest in specific deals for merchandise which was supposedly presold. GLC would then proceed to split the profits of the sale to those who invested in the deal. The investors could either decide to collect their earnings in a single lump sum payment, or choose for a stream of payments which according to the SEC filing “when converted to an interest rate, typically ranged from 13% to 40% for the period of the deal or 50% to 380% on an annualized basis”. Mr. Donnan acted as the recruiter for the scheme, allegedly using his connections in the sports and entertainment world to solicit investors. He did this by approaching former students he coached, fellow coaches, and other athletes he knew. Furthermore, he allegedly often told potential investors that he was in on the deal as well, indicating that he was investing with them. Additionally, he allegedly advertised the investment as having little to no risk since all the deals were supposedly presold.

The scheme was able to gather an estimated $80 million from about 97 investors. From the total collected, only about $12 million was actually used to purchase the merchandise with the remaining $68 million used to pay the early investors in classic ponzi scheme fashion. Also, the fund was used to enrich both Gregory Crabtree. and Jim Donnan. Mr. Crabtree misappropriated an estimated $1.08 million while Jim Donnan invested an estimated $5.8 million, but receive a payment of an estimated $13.2 million, netting him an estimated $7.4 million in gains. Additionally, the children of Mr. Donnan benefitted, by receiving substantially large returns on the investements they did, with some of them netting a 775% gain on their investment.

Both Mr. Crabtree and Mr. Donnan were aware of what they were doing, and continued to expand the scheme even after Mr. Crabtree allegedly told Mr. Donnan that GLC could no longer afford to pay the rates of return which Mr. Donnan was offering to investors. The scheme continued until a group of investors “forced the appointment of a Restructuring Officer to run the operations of GLC” claims the SEC, which lead to the discovery of the scheme and the resignation of Mr. Crabtree as a corporate officer. The company filed for chapter 11 bankruptcy protection, and proceeded to liquidate the merchandise which it had purchased and had sitting in a warehouse.