SEC Puts The Brakes On A $4.5M Life Settlement Scam

The U.S. Securities and Exchange Commission (SEC) has announced in SEC Release 2011-177 that it has gotten a court order to put the brakes on a purported $4.5 million life settlement scam. Life settlements involve transactions between the owner of a life insurance policy and someone else. The owner of the policy sells the policy to the other individual who takes over the premium payments, either because he can no longer afford the payments or no longer wants the policy. The sales price of the policy is a lump sum amount for more than the surrender value but less than the payment of death benefits.

According to SEC documents and allegations, Daniel C.S. Powell, 29, and his company Christian Stanley Incorporated have been operating in the life settlement business for the last seven years or so. Investors were apparently told that the firm made money by brokering the sale of life settlements. There was nothing farther from the truth as the firm hardly made any income from its business operations. According to the Director of the SEC’s Los Angeles Office, Rosalind Tyson, “Powell and Christian Stanley created the façade of an actual business when in reality they have virtually no revenue.” The allegations are that Mr. Powell used his business to bring in some $4.5 million in an unregistered offering of debenture notes.

As in nearly every case like this, the money generated from potential investors did not go towards any investment vehicle. Rather, it went to support a lifestyle of luxury for Powell, fancy cars, fancy hotels, nightclubs, gourmet meals, $21,000 for education loans, $5,000 for cowboy boots and $5,000 to get enrolled in a matchmaking service.

The SEC has alleged that the $4.5 million was raised from 50 or so investors for the fake debenture deal, where Powell promised returns ranging from 5% to 15.5% annually for five year terms. The so called notes were backed by a Nevada gold mine and a Kentucky coal mine. Purportedly, the mine had coal deposits worth $11.8 billion.

U.S. District Court Judge for the Central District of California, George King, granted the TRO (temporary restraining order) requested by the SEC and scheduled a hearing on September 15, 2011 for the injunctive relief.

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