A Florida man received a three-year prison sentence for operating a Ponzi scheme in which investors were not told that investment decisions were primarily based off of lunar cycles and other astrological metrics. Gurudeo "Buddy" Persaud, 47, was arrested earlier this year and charged with one count of mail fraud and four counts of wire fraud in connection with the scheme. Rather than face trial, Persaud agreed to plead guilty to the charges, and was also ordered to pay restitution of nearly $1 million to his defrauded investors.
Persaud was employed as a registered representative of broker-dealer Money Concepts Capital Corp. ("Money Concepts") beginning in February 2003, according to his FINRA Broker Check. Persaud founded the White Elephant Trading Company LLC ("White Elephant") in late 2007, which he registered with the Florida Department of State under the name of his two brothers to avoid his obligation to report his outside business activities to his employer, which was required under industry regulations. In soliciting investors, which sometimes took place at the brokerage firm where he worked, Persaud promised annual risk-free returns ranging from 6% to 18%, which he represented were generated by investments in the futures market and other markets. Potential investors were assured that Persaud that their funds would be safe, with Persaud touting his extensive experience in the financial services industry as a certified financial planner. In total, Persaud and White Elephant raised approximately $1 million from fourteen investors.
However, Persaud failed to disclose to his investors that, rather than invest in the futures markets, "his trading strategies were based on lunar cycles and the gravitational pull between Earth and the moon." Additionally, Persaud misappropriated over $400,000 from investor funds, using that money to support his and his family's lavish lifestyle. Of the money that Persaud did invest, he sustained extensive trading losses beginning in the first month he began trading that totaled $400,000. Additionally, Persaud used investor funds to make distributions of purported profits and principal redemptions - a hallmark of a Ponzi scheme.
In the aftermath of Persaud's arrest, some investors have filed lawsuits against Money Concepts alleging the brokerage is responsible for Persaud's fraud. Thus far, Money Concepts has denied liability. The SEC has also levied civil fraud charges against Persaud.
A copy of the SEC complaint is here.