The U.S. Securities and Exchange Commission sued a South Carolina man and his son over claims they ran a fraudulent investment program to illegally profit from the deaths of terminally ill people.
Benjamin S. Staples and his son Benjamin O. Staples made at least $6.5 million from 2008 to 2012 by offering to pay funeral expenses for dying individuals who agreed to open joint brokerage accounts and then relinquish ownership rights to the brokers, the SEC said in a lawsuit filed today in federal court in Columbia, South Carolina.
Once they had control of the accounts, the Stapleses bought discounted corporate bonds with a “survivor’s option” that allowed them to collect the full principal amount when the joint owner died, the SEC said. Their illicit profit was the difference between the discounted price of the bonds they purchased and the full principal amount they obtained when redeeming the bonds early, the agency said.
“The Stapleses exploited the tragic circumstances surrounding a terminally ill diagnosis and turned the misfortune of others into a profit-making enterprise for themselves,” Kenneth Israel, director of the SEC’s regional office in Salt Lake City, Utah, said in a statement. “The Stapleses deceived brokerage firms and bond issuers by casting themselves as survivors of a joint ownership situation when the deceased had no legal ties to the bonds at all.”
The SEC is seeking disgorgement of ill-gotten gains and financial penalties.
Phone calls to attorneys for the Stapleses weren’t immediately returned.
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