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The Securities and Exchange Commission announced fraud charges against James M. Donnan, III, and Gregory L, Crabtree for allegedly perpetrating a Ponzi scheme. Donnan resides in Athens, Georgia, and Crabtree resides in Proctorville, Ohio. The complaint also names two of Donnan’s children, Jeffrey Todd Donnan and Tammy L. Donnan, and his son-in-law, Gregory K. Johnson, as relief defendants.

The SEC Complaint

According to the SEC’s complaint filed yesterday in federal court in Atlanta, between at least August 2007 and mid-October 2010, Donnan and Crabtree offered and sold high-yielding, short-term (2-12 months) investments in GLC Limited, a West Virginia-based entity, that promised annualized effective rates of return ranging from 50% to 380%, paid to investors in monthly or quarterly installments or in a single one-time payment. Donnan and Crabtree raised a total of approximately $80 million from ninety-seven investors, many of whom were solicited by Donnan using contacts he made as a sports commentator and former college football coach. Donnan and Crabtree told investors that GLC was in the wholesale liquidation business and earning substantial profits by buying leftover merchandise from major retailers and reselling those discontinued, damaged, or returned products to discount retailers. Donnan typically told investors their money was being used to purchase specific items of merchandise that was often presold, so there was little to no risk to investing in any deal.

However, the SEC alleges that in fact, GLC Limited was a Ponzi scheme. Only about $12 million was actually used to purchase leftover merchandise, and the remaining funds were used to pay fake returns to earlier investors or stolen for other uses by Donnan and Crabtree, including steering money to the relief defendants. Donnan’s and Crabtree’s offering of GLC securities was not registered with the SEC as required under the federal securities laws.

The complaint alleges that, based on this conduct, Donnan and Crabtree violated Sections 5(a) and (c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and the assessment of civil penalties against them. The SEC also claims that the relief defendants were unjustly enriched by Donnan’s actions and should disgorge the investor monies they received.

Guiliano Law Group

If you have been the victim of securities fraud and you have a complaint, you should consult with an attorney. The practice of Nicholas J. Guiliano, Esq., and The Guiliano Law Group, P.C., is limited to the representation of investors in claims for fraud in connection with the sale of securities, the sale or recommendation of excessively risky or unsuitable securities, breach of fiduciary duty, and the failure to supervise. We accept representation on a contingent fee basis, meaning there is no cost unless we make a recovery for you, and there is never any charge for a consultation or an evaluation of your claim. For more information contact us at (877) SEC-ATTY.

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