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Alternative Market Briefing

SEC halts $42m mortgage fund Ponzi scheme

Friday, June 29, 2012

Bailey McCann, Opalesque, New York: The Securities and Exchange Commission (SEC) has halted a $42m Ponzi scheme operated by Small Business Capital Corp. and its principal Mark Feathers, who raised $42 million by selling securities issued by Investors Prime Fund LLC and SBC Portfolio Fund LLC - two mortgage investment funds they controlled. The SEC alleges that more than 400 investors were attracted to the funds by promises that profits from mortgage investments would yield annual returns of 7.5% or more.

According to the complaint, from 2009 to early 2012, Feathers improperly transferred more than $6 million from the funds to Small Business Capital to pay its expenses, including substantial payments to Feathers. The regulator also charges that one of the funds was selling mortgages to the other fund at an inflated price, thus generating a false profit that was used to pay management fees and expenses. The SEC also charged Feathers and Small Business Capital for Small Business Capital’s effecting transactions in the funds’ securities without being registered as a broker-dealer with the SEC.

"Feathers raised millions from investors by promising high returns," said John McCoy, Associate Regional Director of the SEC’s Los Angeles Office in statement. "The returns turned out to be too good to be true and were funded in part with new investors’ money."

Investors were never notified ......................

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