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U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 22399 / June 25, 2012

SEC v. Gurudeo Persaud, Civil Action No. 6-12-CV-00932-JA-GJK (M.D. Fla., filed June 20, 2012)

The Securities and Exchange Commission today charged that a former broker in Orlando, Fla., defrauded investors in an astrology-based Ponzi scheme.

The SEC alleges 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 ranging from 6 to 18 percent. Persaud 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 personal expenses, the SEC alleged. The same month Persaud began receiving investor money, he started using some of that money for his personal expenses. The SEC said that Persaud created phony account statements to hide his trading losses and give investors a false sense of security.

Persaud was a registered representative at a Florida-based broker-dealer but separately operated the now-inactive White Elephant, starting in mid-2007. In all, Persaud 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 chiefly relied on an Internet service that provided directional market forecasts based on lunar cycles and gravitational pull. Persaud’s strategy was premised 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, which was filed in the United States District Court for the Middle District of Florida, charges Persaud with violations of Sections 5(a), 5(c), 17(a)(1), 17(a)(2), and 17(a)(3) of the Securities Act of 1933; Section 10(b) of the Securities Exchange Act of 1934 and Rules 10b-5(a), 10b-5(b), and 10b-5(c) thereunder; and Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rules 206(4)-8(a)(1) and (2) thereunder. In its complaint, the SEC seeks disgorgement of ill-gotten gains, financial penalties and permanent injunctive relief against Persaud to enjoin him from future violations of the federal securities laws.

 

 

http://www.sec.gov/litigation/litreleases/2012/lr22399.htm


Modified: 06/25/2012