Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Tuesday, March 23, 2010

SEC Freezes Assets in Alleged Life Settlement Fraud

The SEC recently obtained a judicial order temporarily freezing assets and appointing a receiver to take control of the assets and operations of American Settlement Associates, LLC ("ASA") in an alleged $3.5 million life settlement fraud.  According to its complaint, Charles C. Jordan, Kelly T. Gipson, and ASA LLC, sold fractional ownership interests in a particular life settlement policy to a specific group of investors ("the Policy"), and then failed, without warning or disclosure, to use investors' money to cover the future premium payments on the Policy. Instead of reserving investor funds to pay future Policy premiums, Defendants commingled the funds and used them to pay Defendants' business and personal expenses and to support lavish lifestyles, including payments for jewelry, casinos and other travel and entertainment. The complaint alleges that Defendants enriched themselves with approximately $2.3 million of investor funds. As a result, the Policy lapsed on March 9, 2010. The Commission further alleges that Jordan and Gipson misled investors by falsely claiming that the investments were protected by a bonding company, but failed to disclose to investors significant risks associated with the purported bonding company, including the fact that it is located offshore and is not licensed to provide insurance in the U.S.

The complaint seeks preliminary and permanent injunctions, disgorgement together with prejudgment interest, and civil penalties. The Commission's complaint also seeks an asset freeze against the Defendants, and the appointment of a receiver to recover and conserve assets for the benefit of defrauded investors.

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