Principal of $42 Million Ponzi-Like Scheme Sentenced To 33 Months' Imprisonment
Litigation Release No. 24128 / May 2, 2018
Securities and Exchange Commission v. Small Business Capital Corp.; Mark Feathers; Investors Prime Fund, LLC; and SBC Portfolio Fund, LLC, No. 12-cv-3237 (N.D. Cal. filed June 21, 2012)
United States v. Mark Feathers, No 14-cr-531 (N.D. Cal. filed Oct. 29, 2014)
On March 7, 2018, the Honorable Lucy H. Koh of the U.S. District Court for the Northern District of California sentenced Mark Feathers of Los Altos, California, to 33 months imprisonment, to be followed by three years of supervised release, and the payment of restitution in the amount of $5,724,767.
The criminal charges against Feathers arise from the same conduct alleged in an action brought by the Securities and Exchange Commission in June 2012. The SEC's complaint alleged that more than 400 investors were attracted to the funds by promises that profits from mortgage investments would yield annual returns of 7.5 percent or more. In reality, Feathers operated a Ponzi-like scheme by paying returns to investors that came partly from fund profits and partly from other investors. On August 16, 2013, the SEC obtained summary judgment against Feathers and on November 6, 2013, the court entered a final judgment against Feathers, permanently enjoining him from violating Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and ordered him to pay disgorgement in the amount of $7,782,961 and a $10,000 civil penalty.
On October 29, 2014, the U.S. Attorney's Office for the Northern District of California announced the return of an indictment against Feathers, charging him with seventeen counts of securities fraud and twelve counts of mail fraud in connection with Feathers' management and operation of Small Business Capital and the funds it managed. On December 20, 2017, Feathers pled guilty to one count of mail fraud.
The SEC's litigation was led by John B. Bulgozdy and Lynn Dean.