(HedgeCo.Net) The Securities and Exchange Commission has charged two Texas companies and their principals in a $2.4 million Ponzi scheme and in a related, $1.4 million offering fraud targeting retirees.
The SEC’s complaint alleges that, from 2010 to 2017, Clifton E. Stanley ran a Ponzi scheme through his retirement planning and real estate investment business, The Lifepay Group, LLC. Stanley is alleged to have lured at least 30 elderly victims to invest approximately $2.4 million of their retirement savings with baseless promises and claims of outsized investment returns. He kept the scheme afloat for years by paying early investors with later investors’ funds and by convincing investors to roll over their investments. The SEC further alleges that Stanley pilfered from the estate of an elderly woman’s family trust, diverting nearly $100,000 to fund the Lifepay Ponzi scheme. In addition, the SEC’s complaint alleges that, beginning in 2015, Stanley and Michael E. Watts orchestrated a second offering fraud through a company they controlled, SMDRE, LLC. Stanley and Watts allegedly used a collection of misrepresentations and empty promises to convince a group of predominantly elderly victims to invest roughly $1.4 million in SMDRE.
Stanley is alleged to have used roughly $1.3 million of the Lifepay offering proceeds for personal expenses, including country club memberships, daily living expenses, travel, and entertainment expenses. In addition, Watts and Stanley allegedly engaged in shell game transactions so they could use the vast majority of SMDRE investor funds for personal expenses and to keep the Lifepay Ponzi scheme afloat.
“Fraudulent conduct targeting the most vulnerable among us is reprehensible,” said Shamoil T. Shipchandler, Director of the SEC’s Fort Worth Regional Office. “As the U.S. population ages, financial exploitation of seniors is an increasing and serious problem. It is a Commission priority to protect senior investors through our enforcement and examination programs, and we encourage senior investors and their loved ones to use the resources available on the Commission’s website to help identify risks and red flags.”
The SEC’s complaint charges Stanley, Watts, Lifepay, and SMDRE with violating the registration and antifraud provisions of the federal securities laws. Stanley was also charged for conduct stemming from his role as an unregistered broker.
Also today, the SEC’s Office of Investor Education and Advocacy (OIEA) and the Division of Enforcement’s recently-formed Retail Strategy Task Force (RSTF) jointly issued an Investor Alert to help seniors spot red flags of Ponzi schemes, such as promises of high investment returns with little-to-no risk. The alert also urges seniors to use the free search tool on Investor.gov to check whether an investment professional is licensed and registered. OIEA and RSTF will continue collaborating, including through Investor Alerts and other deterrence and detection initiatives, to help prevent frauds aimed at retail investors, including those that target vulnerable groups such as senior investors.