Reliant Life Shares Misled Investors Into Purchasing Life Settlements, Class Action Says

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A proposed class action alleges Reliant Life Shares used false and misleading statements to sell fractional life settlements to thousands of investors.

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The 36-page lawsuit accuses Reliant and its affiliates and individual owners of misleading those who invested in life insurance policies through the company about their likely annual returns, the risks that they would have to make future out-of-pocket payments to keep the life insurance policies in force, the amount of expected future premiums, and the quality of the life expectancy estimates on which Reliant relied to choose the life insurance policies that were sold to them.

The complaint goes on to allege that the defendants, “in an effort to conceal their wrongdoing from investors,” used the money investors spent on recently sold life settlements to pay premiums on older life settlements. 

According to the case, the defendants also failed to disclose to investors that the funds they took from them to purportedly maintain the insurance policies were not being deposited into the Reliant Trust or other escrow accounts as advertised. Instead, these funds were deposited into accounts that owners Sean Michaels and Scott Grady would access for personal use, the complaint alleges. 

The filing claims that only a portion of investors’ funds were used to pay premiums or cover basic business expenses, and that the men were looting the rest to pay a judgment against them and finance their “excessive compensation.”

Per the suit, the defendants used these misrepresentations and omissions to create the “false appearance” that the life settlements they structured and sold had minimal risk and would pay off within the expected period so as to retain their current investors and entice new ones into investing.

The lawsuit also names as defendants several entities—including Christina Trust, UMB Bank, Bank of Utah and First Western Trust Bank—who the case alleges “aided and abetted” Reliant by knowingly permitting the company to identify them on its marketing materials as the “escrow officers” and trustees of Reliant Trust.

Investors had no way of knowing about Reliant’s alleged misconduct until the California Department of Financial Protection and Innovation issued a desist and refrain order in December 2022 stating that the company had violated state law by selling securities using “untrue statements” and omitting necessary, “material facts,” the case relays.

The truth continued to come to light on August 15, 2023, when a court-appointed receiver filed an ex parte emergency application with the Los Angeles Superior Court, the complaint says. The receiver, based on their examinations of Reliant’s business and financial records as of August 2023, found that the company was at “dire” risk of collapse because it lacked the funds to further operate or continue paying premiums due on life insurance policies for more than three or four weeks, the case shares.

“The Receiver states this outcome will be catastrophic, to thousands of innocent investors, many of whom have invested a significant amount of their life savings in life settlement contracts in which Reliant was involved,” the filing stresses.

The complaint also claims the defendants violated financial elder abuse laws by engaging in a “predatory practice” designed to take advantage of “vulnerable elderly” investors for their own financial gain.

According to the filing, Reliant is now “insolvent” as a result of allegedly reckless conduct of Michaels and Grady.

The lawsuit looks to represent anyone who invested in a life settlement investment by or through Reliant Life Shares. The case also looks to cover a proposed subclass that includes all persons who were 65 years old or older at the time they invested with Reliant Life Shares.

The suit states that there are approximately 2,000 proposed class members.

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