(ATLANTA) — College football Hall of Fame coach Jim Donnan has been hit with fraud charges by federal regulators who allege that he and business partner Gregory Crabtree ran an $80 million Ponzi scheme.
According to a complaint filed by the the Securities and Exchange Commission in Atlanta, the two convinced 100 investors that their GLC limited was a wholesale liquidation business that would earn 50 percent to 380 percent returns by buying “leftover” merchandise from retailers and selling them to discount retailers.
The alleged scheme, which began in August 2007, spent just $12 million of the funds raised to purchase discontinued or leftover merchandise. The remainder of the $80 million was used to dupe early investors by providing “fake returns” or “stolen for other uses,” according to a report released Thursday by the SEC.
An attorney for Crabtree did not immediately return ABC News’ request for comment. An attorney for Donnan, a former University of Georgia coach and ESPN commentator, did not immediately return our request for comment.
“Donnan and Crabtree convinced investors to pour millions of dollars into a purportedly unique and profitable business with huge potential and little risk,” William P. Hicks, associate director of the SEC, said in a statement. “But they were merely pulling an old page out of the Ponzi scheme playbook, and the clock eventually ran out.”
The alleged scheme, which collapsed in October 2010, allowed Donnan to funnel $7 million from the business. Individual investor losses ranged from a few thousand dollars to about $4 million, Hicks said.
The suit filed at the Northern District of Atlanta court accuses the former coach at Marshall University and the University of Georgia used his celebrity to lure some of his victims. In one example, Donnan allegedly told a pro football player, “Your Daddy is going to take care of you” … “if you weren’t my son, I wouldn’t be doing this for you.” The player later invested $800,000.
The SEC’s complaint charged Donnan and Crabtree with violations of the anti-fraud and registration provisions of the federal securities laws. It also names two of Donnan’s children and his son-in-law as relief defendants for the purpose of recovering illicit funds that Donnan allegedly steered to them.
The SEC did not say whether criminal charges would be filed in the case.
Copyright 2012 ABC News Radio
Dylan Byers, CNN Newswire
Robert Mclean, CNN Newswire