A Chicago hedge fund manager was sentenced to more than four years in prison after pleading guilty to a $1.8 million fraud scheme that targeted military veterans.
Clayton Cohn, 30, himself a former U.S. Marine, received a 52-month sentence in U.S. District Court, Northern District of Illinois, Eastern Division in Chicago earlier this month, and was ordered to pay $1.55 million in restitution to the victims of his fraudulent activities after he admitted to wire fraud.
Cohn allegedly masqueraded as a successful hedge fund manager to entice 37 clients to invest more than $1.8 million with his firm, Marketaction Capital Management, from 2010 to 2013.
Cohn lost more than $1.5 million of those investments, according to federal prosecutors, spending at least $400,000 the funds on a Los Angeles mansion, high-end nightclub tabs and early stakes in various start-up enterprises.
According to a corresponding civil complaint brought by the Securities and Exchange Commission, Cohn solicited investors through his Veterans Financial Education Network, a non-profit purporting to help veterans manage their money. Cohn allegedly told his clients that it would be easy for them to redeem their investments, but did not disclose that he planned to divert some of their money for personal use.
Cohn allegedly used his lavish lifestyle to contrive the image of a successful trader and investor, when in reality he lost almost all of the money invested through his fund, hiding his losses with fake account statements showing annual returns exceeding 200 percent for 2012.
Last year, the SEC stayed its civil action after federal prosecutors unveiled Cohn’s indictments. But after Cohn's sentencing, the SEC's fraud charges will proceed in the same venue.