Charges Written 'in the Stars' for Astrological Ponzi Schemer

Florida broker saw lunar effects on the stock market, but managed to miss the Securities and Exchange Commission (SEC) fraud charges coming his way.

The SEC charged a former broker in Orlando with defrauding investors in an astrology-based Ponzi scheme, alleging that Gurudeo “Buddy” Persaud lured family, friends and others into investing in his firm, White Elephant Trading Company LLC, by falsely guaranteeing their money would be safe and yield lofty returns of 6% to 18%. He told investors he would invest in the debt, stock, futures and real estate markets, but did not reveal that his trading strategy was based on his belief that markets are affected by gravitational forces.

According to the SEC’s complaint, filed in U.S. District Court for the Middle District of Florida, Persaud used investors’ money to make payments to other investors, the hallmark of a Ponzi scheme.

Persaud also lost $400,000 of investor funds through his trading and diverted at least $415,000 to pay for his own expenses, the SEC alleged. The same month Persaud began receiving investor money, he started using some of the money for personal expenses. According to the SEC, Persaud created phony account statements to hide trading losses and give investors a false sense of security.

“Persaud preyed on people who trusted him by promising high and steady returns while hiding his unconventional trading strategy,” said Eric I. Bustillo, director of the SEC’s Miami Regional Office. “When Persaud blatantly lied to investors and hid their losses through a Ponzi scheme, he should have known that an SEC enforcement action was in the stars.”

Persaud was a registered representative at a Florida broker/dealer but separately operated the now-inactive White Elephant starting in mid-2007. He raised more than $1 million from at least 14 investors between July 2007 and January 2010.

The SEC alleges that in making trading decisions, Persaud relied on an Internet service that provided directional market forecasts based on lunar cycles and gravitational pull. Persaud’s strategy was based on the idea that gravitational forces affect mass human behavior and, in turn, the stock market. For example, Persaud believed that when the moon exerts greater gravitational pull on the Earth, people feel dejected and are more inclined to sell securities.

The SEC’s complaint seeks disgorgement of ill-gotten gains, financial penalties and injunctive relief against Persaud to enjoin him from future violations of the federal securities laws.

The SEC summary with a link to court documents is available here.