By Jonathan Stempel
(Reuters) - Federal prosecutors in Chicago unveiled a criminal fraud charge against an Illinois man who authorities say masqueraded as a successful hedge fund manager, using his status as a former Marine to entice military veterans to invest with him.
Clayton Cohn, 29, caused 37 investors to invest more than $1.8 million with his firm Marketaction Capital Management LLC from 2010 to 2013, and lost more than $1.5 million of that sum, U.S. Attorney Zachary Fardon in Chicago said on Thursday.
Cohn is scheduled to be arraigned on May 26, and could face up to 20 years in prison after being charged with wire fraud.
The U.S. Securities and Exchange Commission filed civil charges against Cohn in August 2013, and won an asset freeze.
Lawyers for Cohn did not immediately respond to requests for comment.
Prosecutors said Cohn lied to investors and prospective clients by inflating his trading prowess, falsely promising it would be "simple" and "easy" to redeem funds, and concealed how much money he would divert for his personal use.
In its civil case, the SEC said Cohn lured investors through his Veterans Financial Education Network, which purported to help veterans manage their money.
The SEC said Cohn spent some of the money he raised on such things as payments on a Los Angeles mansion, "extravagant" nightclub tabs, and stakes in start-ups focused on t-shirt designs, hair extensions and 3-D adult film production.
The criminal case is U.S. v. Cohn, U.S. District Court, Northern District of Illinois, No. 16-cr-00325. The SEC case is SEC v Cohn in the same court, No. 13-05586.
(Reporting by Jonathan Stempel in New York; Editing by Chris Reese)