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Ex-Marine gets more than 4 years in prison for investment fraud scheme

By ROBERT CHANNICK | Chicago Tribune (Tribune News Service) | Published: January 25, 2017

A former Marine who pleaded guilty to defrauding dozens of people — including fellow Iraq War veterans — in an elaborate investment scheme was sentenced by a Chicago federal judge Tuesday to more than four years in prison.

Clayton Cohn, 30, of Chicago, received a 52-month sentence and must also pay more than $1.55 million in restitution to 33 victims of his company, Marketaction, which promised great returns by investing "in a variety of financial instruments," but instead burned through the cash and diverted funds for personal expenses, according to federal charges.

Currently a student at DePaul University, Cohn was ordered to report to prison after the academic quarter ends in April. He has contributed about $6,000 to the restitution fund as of Tuesday, according to authorities.

"Mr. Cohn sincerely regrets what took place, and looks forward to righting past wrongs," said his attorney, Dan Collins, in an email Tuesday afternoon.

Cohn, a Winnetka native and New Trier High School graduate, invested in and took control of Marketaction in 2010, after buying out original owner Jeff Donahue for $30,000, according to the federal indictment filed in May. Originally conceived as a market alert site for paid subscribers, Cohn converted Marketaction into an investment company, launching a hedge fund in 2011.

Authorities said he brought in $1.8 million from investors but invested no more than $676,562, misrepresenting results through his website and a "maze of financial accounts," the indictment said. Cohn invested some of the funds in several startups, including a T-shirt company, a hair extension enterprise started by a high school friend and a 3-D adult film venture, according to the indictment.

A significant amount of the money was diverted for personal use. Cohn used $345,221 to pay credit card debt; $142,000 for a luxury five-bedroom rental house in Los Angeles and four other residences; $29,000 for nightclubs and bars; and $22,000 at casinos, according to the indictment. In addition, Cohn withdrew at least $286,350 in cash between 2010 and 2014.

In his pitch to investors, Cohn showed annual returns of 180 percent and said he had "skin in the game," with $1.5 million of his own money invested in the fund — neither of which was true, according to authorities.

Cohn pleaded guilty to the fraud scheme in July.

Victims of the scheme included at least eight fellow veterans who lost a total of $706,855 through their investments with Cohn, according to authorities.

At Tuesday's sentencing, Assistant U.S. Attorney Daniel Gillogly requested the first $6,000 be distributed to the victims. "I want to make sure that victims start getting something," Gillogly said.

After the sentencing, Cohn's former partner, Donahue, said he warned early investors to get their money out.

"I spoke with all of the investors at the time, who were all Clayton's Marine friends, and none of them were willing to listen to what I had to say," said Donahue, 52, of Evanston.

©2017 the Chicago Tribune
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