Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

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Wednesday, April 8, 2009

SEC Charges Colorado Man with Ponzi Scheme

The SEC charged Shawn R. Merriman of Aurora, Colorado, and his firm, Market Street Advisors, with conducting a multi-million dollar Ponzi scheme through the sale of interests in at least four investment funds. The Commission alleges that Merriman raised at least $17 to $20 million from at least 38 investors residing in such states as Colorado, Minnesota and Utah.

According to the Commission's complaint, filed April 7, 2009 in federal district court in Denver, Colorado, 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. Contrary to his representations to investors, the SEC alleges that Merriman used investor funds to repay other investors and for 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.

In addition to seeking emergency relief, including an asset freeze, the Commission seeks disgorgement of the defendants' ill-gotten gains plus pre-judgment interest, financial penalties, and permanent injunctions barring future violations of the antifraud provisions of the federal securities laws.

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