Until regulators caught up with him, unregistered Texas “advisor” Clifton E. Stanley funded his lavish lifestyle creatively -- with a successful Ponzi scheme and real estate scam that raised nearly $4 million from unsuspecting retirees in their 80s and 90s.

Then the bottom fell out. On April 6, the Securities and Exchange Commission charged Stanley, of Galveston, Texas; another Texas operator; and two of their companies in a $2.4 million Ponzi scheme and a related, $1.4 million offering fraud -- all targeting the elderly. They were charged Friday by the SEC in the U.S. District Court for the Southern District of Texas, Houston Division.

The SEC's complaint alleges that from 2010 to 2017, Stanley ran a Ponzi scheme through his retirement planning and real estate investment business, The Lifepay Group LLC of Missouri, Texas. He is alleged to have ensnared at least 30 elderly victims into investing approximately $2.4 million of their retirement savings by promising up to 36 percent returns and the lure of new real-estate projects that never materialized,

Instead, Stanley kept the scheme afloat for years by paying early investors with later investors' funds and by convincing investors to roll over their investments. These payments served to convince investors their investments were legitimate -- several who received Ponzi payments even exchanged their mature notes for new notes in greater amounts.

In addition, the SEC alleges that Stanley and Michael E. Watts orchestrated a second offering fraud through a company they controlled, SMDRE LLC.  Stanley and Watts allegedly used a collection of misrepresentations and empty promises to convince a group of predominantly elderly victims to invest roughly $1.4 million in the company. To add insult to injury, investors were not informed that they were also paying a 10 percent to 15 percent commission to Stanley on each SMDRE promissory note they were sold.
   
Stanley is alleged to have used roughly $1.3 million of the Lifepay offering proceeds to pay for a luxury lifestyle that included country club memberships, ocean cruises, spa treatments and pricey entertainment. Watts and Stanley allegedly engaged in shell game transactions so they could use the vast majority of SMDRE investor funds for personal expenses and to keep the Lifepay Ponzi scheme afloat.

"Fraudulent conduct targeting the most vulnerable among us is reprehensible," said Shamoil T. Shipchandler, director of the SEC's Fort Worth Regional Office. "As the U.S. population ages, financial exploitation of seniors is an increasing and serious problem. 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 complaint charges Stanley, Watts, Lifepay, and SMDRE with violating the registration and antifraud provisions of the federal securities laws. Stanley was also charged for conduct stemming from his role as an unregistered broker.

The SEC further alleges that Stanley pilfered from the estate of an elderly woman's family trust, diverting nearly $100,000 to fund his Lifepay Ponzi scheme.

To protect seniors, the SEC issued Investor Alert: Ponzi Schemes Targeting Seniors on Monday. The alert is designed to help seniors spot red flags of Ponzi schemes, such as promises of high investment returns with little-to-no risk. The alert mentioned the Lifepay scheme and another Ponzi scheme recently uncovered by the SEC involving the property group Woodbridge, which allegedly bilked investors out of $1.2 billion.

To avoid unlicensed and unregistered sellers -- a hallmark of so many Ponzi schemes -- the alert also urges seniors to use the free search tool on Investor.gov to check whether an investment professional is licensed and registered. 

Associate editor Christopher Robbins contributed to this article.