In the U.S. District Court for the Southern District of Texas, the US Securities and Exchange Commission is suing Kelly Gipson and Charles Jordan for allegedly orchestrating a multi-million dollar viaticals scam (in the secondary market for life insurance). On March 22, the agency said the court had granted its request for a temporary order to freeze the defendants’ assets.
Also, a receiver has been appointed to take charge of their business, American Settlements Association LLC, and their assets. The SEC is seeking preliminary and permanent injunctions, civil penalties, disgorgement plus prejudgment interest.
Per the agency’s complaint, Gipson and Jordan made at least $2.3 million from March to December 2007 by selling interests in a life insurance policy to over 50 investors in 10 states. They told them they would spend the funds on future premium payments so that the policy wouldn’t lapse. Instead, Gipson and Jordan mixed investors’ money with their funds and diverted it toward their personal spending, including travel, jewelry, entertainment, and casinos.
The SEC says that not only did the policy expire on March 9, 2010 but also it no longer had any value.
The defendants also allegedly failed to disclose their actions to investors and neglected to tell them about the possible risks involved. They also allegedly told investors that a bonding company was protecting their investments. In fact, Provident Capital Indemnity Ltd., which is based in Costa Rica, doesn’t have the license to provide insurance in the US.
The SEC’s complaint accuses Gipson, Jordan, and ASA of violating Section 10(b) of the Securities Exchange Act of 1934 , Section 17(a) of the Securities Act of 1933, and Rule 10b-5 thereunder.
Related Web Resources:
Commission Obtains Asset Freeze and Appointment of a Receiver in Alleged $3.5 Million Life Settlement Fraud, SEC.gov, March 22, 2010
Securities and Exchange Commission (PDF)