The SEC hit college football Hall of Fame coach Jim Donnan with fraud charges on Thursday, August 16, 2012.  The former University of George football coach is accused of helping run an $80 million Ponzi scheme that victimized other coaches and former players.

Working with business partner Gregory Crabtree, Donnan convinced 100 investors that their investment company was a wholesale liquidation business that would earn 50% to 380% returns by purchasing “leftover” merchandise from retailers and selling them to discount retailers.  In reality, they spent only $12 million of the investors’ capital and used the remainder of the $80 million to pay fake returns to early investors.

According to William Hicks, associate director of the SEC, “Donnan and Crabtree convinced investors to pour millions of dollars into a purportedly unique and profitable business with huge potential and little risk. But they were merely pulling an old page out of the Ponzi scheme playbook, and the clock eventually ran out.”

Donnan used his celebrity status to solicit victims.  He allegedly told a pro football player, “Your Daddy is going to take care of you” … “if you weren’t my son, I wouldn’t be doing this for you.” This player subsequently invested $800,000.

This is a classic affinity scam where the alleged scammer victimizes friends and acquaintances in his professional network.  Promising very high returns with nearly no risk is a big red flag.