The Securities and Exchange Commission charged two Texas companies and their principals on April 6 in a US$2.4-million Ponzi scheme and a related US$1.4-million offering fraud, both of which targeted retirees (all figures are in U.S. dollars).
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 promises and claims of outsized investment returns. The allegations have not been proven in court.
The SEC adds that 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 diverted nearly $100,000 from the estate of an elderly woman’s family trust 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.
The SEC’s complaint charges Stanley, Watts, Lifepay, and SMDRE with violating the registration and anti-fraud provisions of the federal securities laws. Stanley was also charged for conduct stemming from his role as an unregistered broker.