SEC Charges Texas Company, Principals in Multimillion Dollar Ponzi Scheme Targeting Seniors
Litigation Release No. 24107 / April 10, 2018
Securities and Exchange Commission v. The Lifepay Group, LLC, et. al., No. 4:18-cv-01098
On April 6, 2018, the Securities and Exchange Commission charged 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 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 thirty elderly victims to invest approximately $2.4 million of their retirement savings with baseless promises and claims of outsized investment returns. 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 pilfered from the estate of an elderly woman's family trust, diverting nearly $100,000 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 Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 thereunder, and seeks disgorgement of ill-gotten gains plus interest, penalties, and injunctive relief. Stanley was also charged with violating Section 15(a) of the Exchange Act for his role as an unregistered broker.
The SEC's investigation was conducted by Tom Keltner and Carol Hahn and supervised by Scott F. Mascianica. The SEC's litigation will be led by Timothy S. McCole.