$3.8M Ponzi scheme funded spa treatment, maids, church tithes: SEC
The owner of a retirement planning firm cheated dozens of investors out of $3.8 million in two related scams that included a Ponzi scheme and fraudulent stock offerings targeting elderly retirees, the SEC says.
Clifton Stanley lured at least 30 victims to invest approximately $2.4 million of their retirement savings into his planning firm, The Lifepay Group of Houston, according to federal court documents filed in Texas.
The agency claims that Stanley, 66, of Galveston, Texas, used approximately $1.3 million of those funds to support a lavish lifestyle including a country club membership, spa treatments, a maid service, ocean cruises, jewelry, clothing, entertainment and even church tithes.
After squandering the money, Stanley “kept the scheme afloat” by making approximately $1.1 million in Ponzi payments, convincing investors that their Lifepay notes were legitimate investments, and enticing them to increase their investments, the regulator says.
One Louisiana couple in their eighties initially invested $25,000 in 2010, and later increased their investments to more than $700,000 — which represented almost the entirety of their cashed-out pension, regulators say. A separate Texas man, who suffered brain injuries from a stroke, began with a $10,000 promissory note, and ultimately invested approximately $600,000 with Lifepay, the SEC says.
The alleged misconduct took place from 2010 to 2017.
“Fraudulent conduct targeting the most vulnerable among us is reprehensible,” says Shamoil 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.”
Beginning in 2015, Stanley and an accomplice Michael Watts, 62, of Sugarland Texas, orchestrated a second promissory-note scheme, this time using the oil-and-gas company they controlled, SMDRE, the regulator says. Stanley and Watts targeted retirement savings, raising approximately $1.4 million by selling SMDRE promissory notes primarily to elderly investors in unregistered transactions, the regulator says.
Clients were unaware that SMDRE made payments of up to a 15% commission to Stanley on nearly every note sold, and that they purchased oil-and-gas interests exclusively from Watts, the regulator says.
The defendants could not be immediately reached for comment and legal counsel was not listed in court documents.
The SEC warned investors about possible Ponzi schemes in an alert issued this week. In December, another alleged scheme bilked investors out of $1.2 billion, the regulator says.
“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,” Shipchandler says.
Red flags include promises of high returns with little or no risk, unlicensed and unregistered sellers and overly consistent returns.