SEC alleges Denver-based mini-Madoff bought Rembrandts in Ponzi scheme
Wednesday, April 08, 2009 at 2:36 pm
The Securities and Exchange Commission sought to freeze the assets of Shawn Merriman and his Market Street Advisors firm Wednesday, alleging the Denver-based money manager bilked investors of as much as $20 million to finance his “lavish lifestyle,” Bloomberg reports.
The lawsuit, filed by federal regulators in U.S. District Court in Denver, alleges Merriman operated a Ponzi scheme for 15 years and spent proceeds on “his own personal purchases of classic cars, motorcycles, motor homes, a cabin in Idaho, and fine art collections, including works by Rembrandt that are worth millions of dollars.”
The SEC complaint alleges Merriman, a 46-year-old Aurora resident, started the Ponzi scheme after a 1995 investment fund lost $400,000. “Rather than reporting those losses to investors, Merriman started another fund to receive new investment monies that would cover any withdrawals by investors from the first fund,” the complaint charges. Merriman started additional investment funds, raising between $17 million and $20 million from family friends, “some of whom were seniors,” in Colorado, Minnesota and Utah, according to the SEC’s civil action.
From an SEC release announcing the lawsuit against Merriman:
… Merriman told investors that he would invest their funds in stocks and options, and he reported impressive and consistent annual returns to investors. Merriman repeatedly deceived investors, many of whom considered him a personal friend, by sending them fictitious account statements showing annual rates of return of 7 to 20 percent. Instead, Merriman did not trade stocks and options after his first year of operations, during which he suffered trading losses, and he used millions of dollars in investor funds to support his lavish lifestyle and pay out withdrawals by other investors. He also offered “rebates” to existing investors to entice them to invest additional money with him.
The SEC wants the court to freeze Merriman’s assets and seek “disgorgement of the defendants’ ill-gotten gains,” as well as enforce penalties and ban the accused from defrauding investors ever again.
Neither Merriman nor his attorney answered or returned calls Wednesday afternoon, Bloomberg and The Denver Post report.