BULLETIN: SEC Says Alleged Life-Settlement Scammer Ran $4.5 Million Fraud And Ponzi Scheme — And Spent $5,000 On ‘Cowboy Boots’ And Another $5,000 For ‘Dating Service’ While Directing $55,000 To A ‘Tribute’ For Deceased Entertainer Michael Jackson; Image Of Former President Bill Clinton Appears On Website

UPDATED 4:32 P.M. EDT (U.S.A.) It’s only getting stranger . . .

The SEC has gone to federal court in Los Angeles and obtained an emergency asset freeze for what it described as a $4.5 million life-settlement fraud and Ponzi scheme operated by a man who spent more than $5,000 in investor funds on “cowboy boots,” nearly another $5,000 on a “dating service,” $1,300 on designer sunglasses, more than $200,000 on luxury cars — and $55,000 in a tribute to the late pop icon Michael Jackson.

The alleged scam also directed enormous sums toward other purchases, the SEC charged. A photo on a website linked to the principal defendant in the SEC’s civil case features an image of former President Bill Clinton, with the White House as its backdrop.

Of the $4.5 million gathered in the fraud, only $90,000 — about 2 percent — was applied to its “avowed” purposes, the SEC charged.

Even the avowed purposes — purchasing life settlements, developing coal leases in Kentucky purportedly worth $11.8 billion or developing interests in gold reserves in Nevada — were dubious or not carried out, the SEC said.

Charged in the case were Daniel C.S. Powell, 29, of Los Angeles, and his company Christian Stanley Inc. Two Powell-related entities — Christian Stanley LLC and Daniel Christian Stanley Powell Realty Holdings Inc. — were named relief defendants.

About 50 investors were fleeced, the SEC said.

“Powell and Christian Stanley created the façade of an actual business when in reality they have virtually no revenue,” said Rosalind Tyson, director of the SEC’s Los Angeles Office. “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.”

“As of August 23, 2011, only $29,396.55 remained in Christian Stanley’s bank accounts,” the SEC charged.

The “Message From Our Chairman” page of “Christian Stanley’s website features a photo of Powell and former President Bill Clinton with the White House as its backdrop. The photo appears to include a disclaimer of some sort, but the type in the disclaimer is small and washes out, making it difficult or impossible to read.

A similar photo featuring an image of Powell and Clinton is displayed elsewhere on the site, but appears to be cropped in a different fashion — and also in such a way that any disclaimer language was lost.

Images of Clinton also were used in promotions for the Mantria “green energy” Ponzi scheme in 2009. It is common for fraud schemes to use images of celebrities to sanitize offers. In 2008, for instance, members of the alleged AdSurfDaily Ponzi scheme painted word pictures that then-President George W. Bush and the White House had given a special award to ASD President Andy Bowdoin.

This list is not all-inclusive, but here are some of the alleged purchases and sums consumed in the alleged fraud by Powell and Christian Stanley:

  • $212,000 for cars, including a Porsche, a Ferrari, a BMW and a Dodge Ram.
  • More than $290,000 in debit card transactions, mostly consisting of payments of Powell’s daily living expenses, including gas, groceries, pharmaceuticals, dry cleaning and retail goods.
  • Cash withdrawals and checks payable to Powell or to cash totaling almost $240,000.
  • More than $160,000 toward Powell’s exorbitant lifestyle, including almost $90,000 for hotels, more than $49,000 for nightclubs, more than $17,000 for restaurants and more than $4,800 for limousines.
  • More than $100,000 in rent paid on behalf of a woman who Powell has described as “like a mother” to him and another woman with no apparent connection to the company.
  • Donations totaling $91,000, including $55,000 toward a tribute to Michael Jackson and $35,000 to the rapper Usher’s New Look Foundation.
  • Miscellaneous luxury purchases, including $8,700 for jewelry, almost $5,000 to register for a dating service, more than $5,000 for cowboy boots and more than $1,300 for designer sunglasses.

Investors believed they’d receive returns of between 5 percent and 15.5 percent per year, the SEC said.

U.S. District Judge George H. King of the Central District of California has ordered an asset freeze and appointed a temporary receiver, the SEC said.

“A life settlement is a transaction in which an individual with a life insurance policy sells that policy to another person, who then assumes responsibility for paying the premiums,” the SEC said. “Typically, the seller no longer wants the policy or can no longer afford to pay the premiums. In exchange, the insured party typically receives a lump sum payment that exceeds the policy’s cash surrender value, but is less than the expected payout in the event of death.”

In its complaint, the SEC charged that Powell and Christian Stanley were selling unregistered securities and that Christian Stanley “has not purchased a single life settlement.”

The scheme has operated for at least seven years, the SEC said.

Read the SEC complaint.

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