LOS ANGELES (CN) – The SEC says it got an emergency order to stop a $4.5 million Ponzi scheme by an L.A.-based company “that purports to broker life settlements.” It claims 29-year-old Daniel C.S. Powell spent thousands of dollars on “cowboy boots” during the 7 years he spent “creating the illusion” that his company, Christian Stanley Inc., was legitimate.
Powell, of Los Angeles, “sold at least $4.5 million in unregistered securities in the form of debentures that promised to pay ‘secured and structured’ annual returns ranging from 5 percent to 15.5 percent to about 50 investors nationwide,” according to the federal complaint.
It continues: “In the written debenture agreements, which Powell authored and signed on behalf of Christian Stanley, debenture purchasers are assured that their monies will be used to purchase life settlements, to develop coal leases purportedly worth $11.8 billion or interests in gold mines or some combination thereof. The debenture agreements state that the investment is secured and collateralized by the purchase of life settlements, by the coal leases, and/or by the gold mine interests. In reality, defendants applied less than $90,000 of the amount they raised – about 2 percent – toward these avowed purposes, and have spent over 50 percent of the remaining investor funds for purposes that bear no relation to the operation of Christian Stanley’s purported business, including payment of commissions to debenture sales agents, funding Powell’s lavish lifestyle, and the perpetuation of a Ponzi-like scheme whereby interest due on some of the debentures was paid with investor principal.”
In a statement announcing its lawsuit, the SEC said that Powell and his company have spent the past 7 years “creating the illusion that it was a legitimate company involved in the life settlement industry.”
The statement continues: “Contrary to what investors were told, Christian Stanley has never purchased or generated any revenue as a result of brokering the sale of a single life settlement, and has barely derived any revenue from any of its purported business ventures. Instead, Powell has simply used the Christian Stanley name as a vehicle to raise at least $4.5 million in an unregistered offering of debenture notes, and spent most of the money for purposes unrelated to its ostensible business operations. Powell misused investor funds to finance his stays at luxury hotels, visits to nightclubs and restaurants, and purchases of high-end vehicles.”
A federal judge froze the defendants’ assets late last week, the SEC said. But not before Powell used $21,000 to pay off school loans, spent $5,000 on cowboy boots and nearly $5,000 “to register for a dating service,” according to the SEC.
U.S. District Judge George King, who froze the funds, will hold a hearing on Sept. 15 on the SEC’s request for a preliminary injunction.