Regulator claims outfit never bought single life settlement policy but sold debentures using the firm's name
A firm purporting to sell life settlements has been ordered by a federal court judge in Los Angeles to stop what federal regulators say was a $4.5 million investment scheme that defrauded more than 50 investors.
The Securities and Exchange Commission alleges that Daniel C.S. Powell, 29, and his firm, Christian Stanley Inc., spent the previous seven years cultivating a false impression that it was a legitimate player in the life settlement industry, which involves the sale of someone's life insurance policy to another person.
But Christian Stanley has never purchased or sold a life settlement. Instead, Mr. Powell used the firm's name to raise at least $4.5 million by selling unregistered debenture notes that promised to return 5% to 15.5% a year for five years, the SEC said.
Mr. Powell then used investors' money to pay for his own entertainment, including high-end vehicles, luxury-hotel stays, and visits to nightclubs and restaurants, the commission claims.
U.S. District Court Judge George King yesterday issued an emergency court order stopping Mr. Power and Christian Stanley from sales, and he froze their assets.
“Most of the money raised from investors has been used to finance Powell's extravagant lifestyle and for other purposes that have not been disclosed to investors,” said Rosalind Tyson, director of the SEC's office in Los Angeles.
Mr. Powell told investors who bought the debenture notes that they were backed by assets, including a Nevada gold mine and a Kentucky coal mine that had $11.8 million in coal deposits, the SEC said. The commission claims Mr. Powell also said the notes would be used to buy life settlements and to develop coal leases or interests in gold mines.
Christian Stanley's attorney, Jonathan Schwartz, had no comment. The lawyer representing Mr. Power didn't return a call seeking comment.
With life settlements, the purchaser of the life insurance policy pays the rest of the policy premiums and receives a lump-sum payment when the insurance policy cashes out upon the seller's death.
