Aug 16, 2012 06:20 PM EDT

Jim Donnan: College Football Hall Of Famer Charged In $80 Million Ponzi Scheme

According to information from and the SEC,

Jim Donnan, college football Hall of Fame coach, enticed former players and coaches to invest in his $80 million Ponzi scheme, according to the SEC

 A Ponzi scheme is a fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns for older investors by acquiring new investors. This scam actually yields the promised returns to earlier investors, as long as there are more new investors. These schemes usually collapse on themselves when the new investments stop.

The SEC charged Donnan, the former University of Georgia football coach and recent ESPN sports commentator, and his business partner Gregory Crabtree, for conducting fraud through a West Virginia-based company called GLC Limited.

The SEC says Donnan and Crabtree told investors that they could get returns of 30% to 50% if they invested in GLC, a wholesale liquidation business. The business partners ran the scheme between  August 2007 and October 2010 telling investors they earned the profits by buying leftover merchandise from major retailers and reselling them to discount retailers, the SEC says.

"However, only about $12 million of the $80 million raised from nearly 100 investors 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," the SEC claims.

The formal complaint, which also names two of Donnan's children and his son-in-law as defendants, says a majority of the investors in the Ponzi scheme were contacts Donnan made as a sports commentator and football coach. The agency says Donnan used his influence to convince them to invest. From the SEC:

For example, when approaching a former player that Donnan had coached, Donnan told him "Your Daddy is going to take care of you" and "if you weren't my son, I wouldn't be doing this for you." That player later invested $800,000

Investors include former Kentucky basketball coach Billy Gillispie, former Alabama basketball player and coach Mark Gottfried, former UGA football player Kendrell Bell and football coaches Barry Switzer, Dennis Franchione and Tommy Tuberville, according to a report from the Athens Banner-Herald.

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