According to The New York Times (8/16/12), the Securities and Exchange Commission (SEC) filed a lawsuit in an attempt to recover approximately $80 million from Donnan and Crabtree. The lawsuit alleges Donnan took money from approximately 100 investors for a liquidation business called GLC by promising returns of between 50 and 380 percent. Of the $80 million he raised, however, approximately $12 million actually went to purchasing business merchandise. The rest was used to pay earlier investors, with around $7 million going to Donnan and another $1.08 million to Crabtree.
The SEC notes that the Ponzi scheme began in August 2007 and ended in October 2010. Donnan found most of his investors by approaching contacts he made either as a coach or as a sports commentator. One investor, who invested $800,000 with Donnan, was reportedly told, "if you weren't my son, I wouldn't be doing this for you." Both Donnan and Crabtree filed for bankruptcy protection recently, after the business failed and investors demanded the return of their money.
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A Ponzi scheme is an illegal investment scheme in which money invested by newer clients is used to pay off earlier clients, rather than going into legitimate investments. Ponzi schemes fail when a large number of investors want to cash in their investments at once or when new investors fail to materialize, leaving existing investors with no money.
The largest Ponzi scheme in the US was that of Bernard Madoff, who is currently serving a 150 year sentence for his scheme that involved approximately $50 billion dollars.