U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 21458 / March 22, 2010
SEC v. American Settlement Associates, LLC, Charles C. Jordan and Kelly T. Gipson, Case No. 4:10-cv-00912 (S.D. Tex. March 19, 2010)
Commission Obtains Asset Freeze and Appointment of a Receiver in Alleged $3.5 Million Life Settlement Fraud
On March 19, 2010, the U.S. District Court for the Southern District of Texas granted the SEC's request and issued an order temporarily freezing assets of the Defendants and appointing a receiver to take control of the assets and operations of American Settlement Associates, LLC ("ASA").
According to its complaint, the Commission alleges that 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 alleges that Jordan, Gipson and ASA violated Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. 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.
The Commission acknowledges the cooperation and assistance of the Alberta Securities Commission and the Internal Revenue Service.
See Also: SEC Complaint