A former Massachusetts church elder is accused of defrauding dozens of investors out of at least $3.5 million with the promise of exorbitant returns through a proprietary day-trading system allegedly revealed to him by the Holy Spirit. Charles Erickson, of Uxbridge, Massachusetts, was charged by the Massachusetts Securities Division with multiple violations of the Massachusetts Securities Act through the offer and sale of fraudulent and unregistered securities. The Complaint seeks injunctive relief, compensation for defrauded investors, disgorgement of ill-gotten gains, administrative fines, and other relief.
According to the Complaint, Erickson allegedly began looking in 2008 for a way to supplement his retirement income, settling on trading volatile E-Mini Russell 2000 futures contracts (the "E-Minis"). Despite having limited investing experience and no day-trading experience, Erickson developed a proprietary system for trading the E-Minis that he claimed had been provided to him by the Holy Spirit. Indeed, in testimony provided to the Massachusetts Securities Division, he stated:
It's going to sound a little strange to you, but ... I believe the Holy Spirit showed me this system.
When asked by authorities how he determined whether to enter buy or sell orders, he testified:
That's proprietary...I don't want to give my system away. I don't want to be rude, but this thing flat-out works.
After initially trading with his own money, Erickson began soliciting investors - most of whom he found at his church - with the promise that he could deliver much higher returns than the less-than-one percent returns they were currently earning from their bank. Erickson, who previously served as a church elder at his local church, told potential investors that they could earn a 4% monthly return, which translated to an annual return of nearly 50%. Investors were shown a spreadsheet which they understood to be Erickson's actual trading results, and understood that they would receive the promised monthly returns for a period of two years before Erickson would return their invested principal. In total, Erickson received at least $3.5 million from over 25 investors.
However, despite representing that his system was quite profitable and continuing to accept new investments, authorities allege that Erickson failed to disclose that he began suffering significant trading losses in 2013. Erickson ceased making interest payments to investors in September 2014, and disclosed in a December 2014 letter to investors that he had "zero capital and almost zero assets." In a subsequent letter, Erickson claimed that while his system worked, "I did not work the system!" In questioning from authorities as to why Erickson did not "work the system," Erickson testified "that's a good question." Erickson later disclosed that the "system" did not generate returns every month, and that he would use "reserves" - investor funds - to pay the guaranteed returns to investors during those situations.
According to authorities, Erickson's use of new investor funds to pay guaranteed returns to existing investors was a Ponzi scheme that ultimately resulted in the scheme's collapse when available funds were depleted. While a significant portion of investor funds were ultimately used to pay returns, authorities estimate that investors suffered hundreds of thousands of dollars in losses.
A copy of the complaint is below.