The Securities and Exchange Commission’s Los Angeles district office has obtained an emergency court order halting all operations and freezing the assets of a company it says has been “creating the illusion” for seven years that it was taking investors’ money and investing it in life settlements.
Instead, SEC attorneys claim in their complaint in federal court, the company, Christian Stanley, Inc., was allegedly used by the founder, Daniel C.S. Powell, 29, to finance “stays at luxury hotels, visits to nightclubs and restaurants,” and for “purchase of high-end vehicles.”
Marc Blau, assistant director of enforcement at the SEC’s Los Angeles office, told On Wall Street, “Christian Stanley’s actual investment in life insurance policies was de minimis at best.”
The SEC complaint alleges that since March 2009, Christian Stanley and Powell “offered and sold at least $4.5 million in unregistered securities in the form of debentures” to some 50 investors to whom they “promised to pay ‘secured and structured; annual returns ranging from 5% to 15.5%.”
The complaint further alleges, “In reality, defendants applied less than $90,000 of the amount they raised -- about 2% -- toward these avowed purposes, and have spent over 50% of the remaining investor fund for purposes that bear no relation to the operation of Christian Stanley’s purported business.”
The SEC claims Powell used investors’ money “for such unrelated purposes as sales commissions and Ponzi-like payments to existing note holders,” as well as to make “personal expenditures” allegedly including $21,000 toward his school loans, $5,000 for cowboy boots and “nearly $5,000 for a dating service.”
The SEC alleges that Powell told investors the notes were “backed by assets such as a gold mine in Nevada and a coal mine in Kentucky.”
In a typical life settlement transaction, an individual owner of a life insurance policy sells it to another party or company for a set sum, with the purchaser taking over the premiums and becoming the beneficiary.
Federal Judge George H. King of the U.S. District Court for the Central District of California has granted the SEC’s request for a temporary restraining order and asset freeze against Powell and his company, and has set a hearing for Sept. 15.
Efforts to obtain a comment from Christian Stanley, Inc., Powell or his attorney or record were not immediately successful.