The Securities and Exchange Commission last week obtained an emergency court order to halt an alleged $4.5 million investment scheme by a Los Angeles-based company that purports to broker life settlements.

The SEC contends that Daniel C.S. Powell and his company, Christian Stanley Inc., has posed as a legitimate company in the life settlement industry since 2004. However, the SEC alleges that the firm has never purchased or generated any revenue as a result of brokering the sale of a single life settlement, and has barely derived any revenue from any of its purported business ventures.

The SEC contends that Powell used the company's name to raise at least $4.5 million in an unregistered offering of debenture notes, and spent most of the money for purposes unrelated to its ostensible business operations.

In its complaint, the SEC alleges that Powell misused investor funds to finance his stays at luxury hotels, visits to nightclubs and restaurants, and purchases of high-end vehicles.

Judge George H. King for the U.S. District Court for the Central District of California granted the SEC's request on Sept. 2, issuing a temporary restraining order and asset freeze against Powell and Christian Stanley Inc.  The court also appointed Robb Evans & Associates LLC as temporary receiver over the entities.

A preliminary court hearing on the SEC's motion is scheduled for Sept. 15.

"Powell and Christian Stanley Inc., 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."

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. 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.

According to the SEC's complaint, Powell raised funds from at least 50 investors nationwide in the fraudulent debenture offering, promising investors fixed interest returns ranging from 5 percent to 15.5 percent annually for five-year terms. Powell claimed the notes were backed by assets such as a gold mine in Nevada and a coal mine in Kentucky that he said held deposits valued at $11.8 billion.

The SEC alleges that instead of using investor money to purchase life settlements or develop the coal and gold mines, Powell and Christian Stanley Inc. used the money for such unrelated purposes as sales commissions and Ponzi-like payments to existing note holders.

Among Powell's other personal expenditures with investor funds were $21,000 toward his school loans, more than $5,000 for cowboy boots, and nearly $5,000 to register for a dating service.

The SEC is seeking a permanent injunction against Powell and Christian Stanley Inc. from operating in the financial securities industry, the disgorgement of all ill-gotten gains and unspecified civil penalties.