IOWA -- John Krohn drives a Mercedes Maybach, valued at nearly $200,000, and lives in one of the highest dollar homes in Polk County. Records from the assessor's office show he's buying the exclusive Glen Oaks property under contract for more than $4.7 million. Cap Hermann believes Krohn should be living behind bars.
"Yeah, I'd like to see him do some time," says Hermann.
In 2016, Hermann invested in a company called Spotlight Innovation, a pharmaceutical holding company marketing a painkiller made from snake venom.
"The stock price went up initially for a few days, then it started dropping like someone popped a balloon," says Hermann. "He assured me that everything was going to be bright and rosy ... and convinced me that we would all be profitable."
But Hermann says he has yet to talk to anyone who has made money off of Spotlight. Hermann lost $50,000.
"It was a hit. You lose anything it's not good, but that was significant -- painful."
Spotlight stock is now worthless. Regulators warn the company may not be making material information publicly available and that trading the stock while in possession of material non-public information may lead to civil and criminal penalties. The same goes for Gooi Global, a corporation that lists Krohn as a director in a 2015 quarterly report.
Krohn, according to the Secretary of State's website, is also a manager for K-4 Enterprises and Gooi Development and was a principal for Kem X Global.
"It became apparent that the funding and corporate governance of the parent company, Gooi Global, were not appropriate and probably not legal," says Ted Sporer, an attorney representing two people now suing Krohn.
The lawsuits accuse Krohn of "fraud" and allege the companies are "under capitalized" and "part of a larger Ponzi scheme."
"They would solicit investments through a variety of representations through Gooi Global and then the money would be distributed throughout, either by acquiring new businesses or setting up new business, and the money would not be used for the purposes for which it was originally intended," says Sporer.
Drake Law Professor Matt Doré, who specializes in commercial law, says that's problematic from a securities perspective.
"Certainly misrepresenting where the client’s money is going is a much greater misrepresentation than what you would normally see ... You've got to do what you promised to the client."
Krohn denies the allegations. WHO-TV caught up with him at his K-4 office in Urbandale.
“You can’t have a Ponzi scheme when it’s all your own money," says Krohn. "From a shareholder's perspective - the shareholders, you know, when they invest in something, they do take a risk."
Emails obtained from people formerly associated with Spotlight and Gooi Global suggest the risks started mounting in 2017.
One notes a "failure to pay payroll taxes."
In another, a board member states, "My personal comfort level with the accounting processes of both Gooi Global, Inc. and Gooi Mortgage is nil."
And in another email, a shareholder asks, "Why the company hasn't filed its reports."
Krohn, who according to SEC filings, stepped into the CEO role for Spotlight in October of 2018, admits Gooi Global and Spotlight haven't issued a quarterly report since June of last year.
"Because we ran out of money that we were putting in," says Krohn.
When asked what he thinks happened to his money, Hermann says he believes Krohn took it and spent it. "What he spent it on, I have no idea."
"Clearly it was being used to fund their lifestyles," says Sporer.
Krohn says that's not true.
"I haven't been paid in a year and a half."
When asked how he's paying for his house, Krohn says he's "using his personal resources for that."
"I’ve put millions and millions of dollars into these things and I’m the only one at this particular point who can save the shareholders," says Krohn. "I'm raising money personally to inject into - and I'd prefer not to share how I'm doing that - but I'm expecting large amounts of capital."
Hermann doesn't buy it.
"I can tell you what he does. He gets someone else to invest for that same purpose and then he goes and spends their money," says Hermann. "I certainly would advise anyone to stay away from him."
Krohn's attorney also declined multiple offers to be interview, but in an email denied any impropriety took place. He says Krohn's role in Spotlight has been to assume control of a struggling company in an attempt to turn it around. He went on to say that 2017 SEC filings show that Krohn and his business partner are by far the largest shareholders and largest debt holders in the company, investing substantial capital in an effort to fulfill Spotlight Innovation's mission.
Anyone with a complaint against a financial advisor should contact the Iowa Insurance Division at 877-955-1212.
"Any Iowa consumers who have questions or concerns regarding their financial advisor are urged to contact the Iowa Insurance Division. As Iowa's securities regulator, we can help consumers work through those questions or concerns and investigate if it appears something is out of the ordinary," says Chance McElhaney, Iowa Insurance Division spokesman.
You can also check your broker's licensing and complaint history at https://brokercheck.finra.org/