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Multimillion Dollar Ponzi Scheme Targeting Seniors; SEC Charges

Multimillion Dollar Ponzi Scheme Targeting Seniors; SEC Charges

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$2.4 Million Ponzi Scheme and Related $1.4 Million Offering Fraud Targeting Retirees

On April 6, 2018, the Securities and Exchange Commission announced charges against 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 (“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.

Stanley 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.

The SEC’s complaint also alleges that, beginning in 2015, Stanley and Michael E. Watts (“Watts”) orchestrated a second offering fraud through a company they controlled, SMDRE, LLC. Allegedly, Stanley and Watts 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.

The SEC’s complaint charges Stanley, Watts, Lifepay, and SMDRE with violating the registration and antifraud provisions of the federal securities laws. Stanley also was charged for conduct stemming from his role as an unregistered broker.

For additional information, please review a recently issued investor alert from the SEC’s Office of Investor Education and Advocacy and the Division of Enforcement’s recently-formed Retail Strategy Task Force to help seniors spot the warning signs (“red flags”) of Ponzi schemes.

Source: SEC.gov

Kehoe Law Firm, P.C.