Donnan also funneled large sums to two of his adult children and a son-in-law, and regulators are seeking to recover at least some of that money, the SEC said.
The SEC's complaint charges Donnan and Crabtree with violating federal securities laws.
A lawyer for Donnan did not immediately return a phone call and email message seeking comment. A lawyer for Crabtree did not immediately return a phone call.
Donnan's attorney has previously acknowledged the former coach was paid lucrative commissions, but he said Donnan believed he was being paid from legitimate profits earned by the company.
Donnan was head football coach at Marshall University from 1990 through 1995 and at the University of Georgia from 1996 through 2000 and later became an ESPN analyst.
Among the coaches Donnan helped attract were Texas State football coach Dennis Franchione; Virginia Tech football coach Frank Beamer; ex-Dallas Cowboys coach Barry Switzer and Texas Tech football coach Tommy Tuberville.
Donnan used his influence with former players who looked up to him, federal regulators said. According to the SEC court filing, he told one player, "Your Daddy is going to take care of you," and, "if you weren't my son, I wouldn't be doing this for you," the SEC complaint said. That former player, who was not named, ended up investing $800,000.
A federal bankruptcy judge last month approved a settlement for Donnan and his wife. Creditors claimed the Donnans owe them more than $40 million. The exact amount they'll receive won't be known until a court-appointed trustee liquidates most of Donnan's assets. A federal judge in Ohio, where GLC is being restructured in bankruptcy court, approved the settlement.
In outlining the alleged fraud, the SEC said Crabtree formed GLC in 2004 and began buying and selling liquidated, damaged, or returned merchandise. Donnan funded a GLC deal to buy and resell appliances in July 2007 and then began recruiting other investors.
Donnan typically offered investors a chance to provide money for specific "deals" by GLC. When deals were supposedly finished, Donnan often encouraged investors to "rollover" their principal or interest payments into new deals, the SEC said. He told some investors their profits were "guaranteed" and told at least one investor "you can't lose your money; it's already pumping oil."
In late 2009 or early 2010, Crabtree told Donnan that GLC could no longer pay the rates of return Donnan was promising investors. The company began missing interest payments due to investors in August 2010.
Around that time, Donnan told at least one investor things were slowing down. He also told his son's in-laws, who were GLC investors and wanted to invest more, not to invest further.
But neither Donnan nor Crabtree disclosed GLC's financial problems to new investors. And Donnan, with Crabtree's knowledge, continued raising funds for deals while promising future returns, the SEC said.
Ultimately, a group of investors forced the appointment of a restructuring officer to run GLC. As that restructuring officer began to uncover the details of the fraud, Crabtree resigned and in February of last year, the restructuring officer had GLC file a voluntary bankruptcy petition.