Two South Texas businesses and their owner-executives operated a pair of Ponzi schemes to raise $3.6 million from dozens of elderly investors as old as 101 and used a good portion of the money for personal reasons, including country club memberships, spa treatments, maid service and tithing to a church, according to federal charges brought by the U.S. Securities and Exchange Commission.
Lawyers from the SEC’s Fort Worth Regional Office filed securities fraud charges in federal court in the Southern District of Texas against Clift Stanley of Galveston and Michael E. Watts of Sugar Land and their businesses, The Lifepay Group and SMDRE.
In a 17-page complaint, the SEC claims that Stanley, who is 66, operated a Ponzi scheme from 2010 to 2017 through his retirement planning and real estate investment business, The Lifepay Group.
Stanley “lured at least 30 elderly victims to invest approximately $2.4 million of their retirement savings with baseless promises and claims of outsized investment returns,” the SEC states.
The federal agency claims that Stanley “kept the scheme afloat for years by paying early investors with later investors’ funds and by convincing investors to roll over their investments.”
In 2015, Stanley and Watts, who is 62, orchestrated a second offering fraud through an oil and gas investment company they controlled called SMDRE, SEC officials claim.
The duo “used a collection of misrepresentations and empty promises to convince a group of predominantly elderly victims to invest roughly $1.4 million in SMDRE.”
“Fraudulent conduct targeting the most vulnerable among us is reprehensible,” said SEC Regional Director Shamoil Shipchandler.
“As the U.S. population ages, financial exploitation of seniors is an increasing and serious problem,” Shipchandler said. “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.”
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.