U.S. Securities and Exchange Commission
Litigation Release No. 21903 / March 28, 2011
SEC v. John Scott Clark, Impact Cash, LLC and Impact Payment Systems, LLC Case No. 1:11 CV 00046 DAK (USDC Utah, Filed March 25, 2011).
SEC OBTAINS ASSET FREEZE AND OTHER RELIEF IN $47 MILLION OFFERING FRAUD
On March 25, 2011, the Securities and Exchange Commission obtained an emergency asset freeze in a $47 million offering fraud and Ponzi scheme orchestrated by John Scott Clark (Clark) through Impact Cash, LLC and Impact Payment Systems, LLC (collectively Impact), companies owned and controlled by Clark, which operated an online payday loan company. In addition to the asset freeze, the court has appointed a receiver to preserve and marshal assets for the benefit of investors. That Receiver is Gil A. Miller.
The complaint alleges that from March 2006 through September 2010, Impact and Clark (by himself and through sales persons) raised more than $47 million from at least 120 investors for the stated purposes of funding payday loans, purchasing lists of leads for payday loan customers, and paying the operating expenses of Impact. The complaint further alleges that Clark did not deploy investor capital to make payday loans as represented, but instead diverted investor funds to maintain a lavish lifestyle, including buying expensive cars, art and a home theatre system. Clark also misappropriated investor money to fund outside business ventures and used new investor funds to pay purported profits to earlier investors.
The Commission’s complaint charges Impact and Clark with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and charges Clark with violations of Section 15(a) of the Exchange Act. The complaint seeks a preliminary and permanent injunction as well as disgorgement, prejudgment interest and civil penalties from Impact and Clark.