A group of investors have sued troubled investment brokerage Reliant Life Shares LLC, claiming the company misled investors about their expected annual returns from so-called life settlement investments, and then allegedly engaged in a scheme to use past returns for other investors to pay for the current and future returns of newer investors.
A life settlement is an investment vehicle under which a broker or other third party pays a would-be investor to use all or a portion of the proceeds from a sale of an insurance policy.
The lawsuit was originally filed in Los Angeles County Superior Court, but later transferred to federal court on Oct. 11.
The company concealed from investors "the true nature of the investments," the suit states.That included information about out-of-pocket payments investors would have to make to keep the life insurance policies in force, the suit alleges.
The company managers were allegedly "looting" Reliant by using new investor funds to pay premiums on policies that had been purchased by the company years earlier, the suit said.
Reliant is now insolvent and does not have enough money to pay premiums on the life insurance policies it purchased, according to the suit.
The plaintiffs seek to recover their investments in Reliant plus unspecified damages and legal fees.
They are represented by Thomas G. Foley and Kevin Gamarnick of Foley, Bezek, Behile & Curtis LLP and Richard Donahoo and Sarah Kokanas of Donahoo & Associates, PC.
Reed et al v. Reliant Life Shares, U.S. District Court for the Central District of California, 2:2023cv08577.