Who says the Securities and Exchange doesn’t have a sense of humor?
In a press release this week, the markets regulator noted that it had filed charges in a rather unusual case: A former broker in Orlando, F.L., had allegedly defrauded investors in a Ponzi scheme based on, of all things, astrology.
The SEC alleged that Gurudeo “Buddy” Persaud lured people into investing in his firm, White Elephant Trading Company LLC, by “falsely guaranteeing their money would be safe and yield lofty returns ranging from 6 to 18 percent.”
Persaud, the SEC said, told investors he would invest in the usual financial instruments, but he left out one small detail about his plans.
Persaud, the SEC said, “did not reveal that his trading strategy was based on his belief that markets are affected by gravitational forces.”
In fact, the SEC says Persaud got his stock market intelligence from an Internet service that provided “directional market forces based on lunar cycles and gravitational pull.”
Apparently, he believed that gravity affects mass human behavior and therefore 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 wrote.
The SEC also said that Persaud used investors’ money to pay off other investors, and allegedly diverted as much as $415,000 to pay for personal expenses.
But the whole gravity thing wasn’t a heavyweight strategy, and Persaud allegedly was reduced to creating phony statements to hide his trading losses from his investors, which totaled $400,000, the commission said. In all, he allegedly raised more than $1 million from at least 14 investors.
And the commission seemed to recognize the ridiculousness of all this.
Eric Bustillo, Director of the SEC’s Miami Regional Office, said in a statement, “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.”
You see what Bustillo did there?
The SEC’s complaint seeks disgorgement of ill-gotten gains, financial penalties, and injunctive relief against Persaud.
The commission said Persaud does not have a lawyer in this case, and CNBC was unable to immediately locate him for comment.