Litigation Release No. 23733 / January 30, 2017

United States v. Clayton A. Cohn, Case No. 1:16-cr-00325 (N.D. Ill.)

Ex-Marine Hedge Fund Manager Sentenced to 52 Months in Prison for Scheme That Targeted Fellow Veterans

The Securities and Exchange Commission announced today that, on January 24, 2017, the Honorable Jorge L. Alonso of the United States District Court for the Northern District of Illinois sentenced former hedge fund manager Clayton A. Cohn to 52 months in prison, to be followed by two years of supervised release, and ordered Cohn to pay $1.55 million in restitution to defrauded investors. Cohn, a former Marine who lives in the Chicago area, was the managing member of Market Action Advisors, an investment adviser that managed Market Action Capital Management, a hedged fund created by Cohn.

On August 6, 2013, the SEC obtained an emergency court order to halt a hedge fund investment scheme orchestrated by Cohn, alleging that Cohn raised nearly $1.8 million from investors through his hedge fund by lying to investors about his success as a trader, the performance of the hedge fund, his use of investor proceeds, and his personal stake in the hedge fund. According to the SEC's complaint, Cohn invested less than half of the money raised from investors and used more than $400,000 for personal expenses, including a Hollywood mansion, luxury automobile, and extravagant tabs at high-end nightclubs. The SEC claimed that Cohn used his lavish lifestyle to portray himself as a successful trader and investor, when in reality he lost nearly all of the money invested. According to the complaint, in order to cover up his trading losses and misappropriation of investor funds, Cohn generated phony hedge fund account statements that claimed annual returns exceeding 200 percent. The Commission's action has been stayed pending the outcome of the criminal case.

On May 19, 2016, prosecutors charged Cohn with one count of wire fraud based on the same conduct described by the SEC, alleging that his scheme defrauded approximately 37 investors, including many veterans and even some Marines who served with Cohn. On July 5, 2016, Cohn pled guilty to the charges against him.

For further information, see Press Release 2013-149, SEC Halts Ex-Marine's Hedge Fund Targeting Fellow Military (Aug. 6, 2013).