Broker charged in astrology-based Ponzi scheme

A former broker from Orlando, Fla. is being charged with defrauding 14 investors of more than $1 million in an astrology-based Ponzi scheme.

The SEC alleges Gurudeo “Buddy” Persaud lured family, friends, and others into investing in his firm, White Elephant Trading Company, by guaranteeing their money would yield lofty returns of between 6% and 18%.

Persaud said he would invest in the debt, stock, futures, and real estate markets. Instead, he used investors’ money to make payments to other investors – as is common for Ponzi schemes. He also lost $400,000 of investor funds and diverted at least $415,000 to pay for his personal expenses, according to the complaint filed in U.S. District Court for the Middle District of Florida.

Read: Fraud slipping past Canadian regulators

He also didn’t reveal his trading strategy was based on astrology. He used an Internet service that provided market forecasts based on lunar cycles and gravitational pull and allegedly believed gravitational forces affect human behavior, and in turn, the stock market. For example, when the moon exerts greater gravitational pull on the Earth, people feel dejected and are more inclined to sell securities.

When the scheme started to fall apart, Persaud created phony account statements to hide trading losses and give investors a false sense of security.

“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,” says Eric I. Bustillo, director of the SEC’s Miami Regional Office.

Read: Broker makes 9 unauthorized sales

Persaud was a registered representative at a Florida-based broker-dealer but separately operated the now-inactive White Elephant. In all, he defrauded 14 investors of more than $1 million from July 2007 to January 2010, according to SEC filings.

Staff

The staff of Advisor.ca have been covering news for financial advisors since 1998.