According to SEC charges released Friday, Gurudeo"Buddy" Persaud applied an “astrology-based” formula to money management, consistent with his view that markets are affected by gravitational forces.
The equity market is a mysterious animal and money managers use all kinds of technical formulas to wring pennies out of the movements of stocks. Then there are some not-so-technical formulas, like the one allegedly used by Gurudeo “Buddy” Persaud, a former broker who headed up Orlando, Fla.-based White Elephant Trading Company.
According to SEC charges released Friday, Gurudeo applied an “astrology-based” formula to money management, consistent with his view that markets are affected by gravitational forces. Unfortunately, he didn’t let investors know that his promises of returns of 6 to 18 percent on their investments were based on such an inventive strategy, the SEC says. When these returns didn’t pan out, he used payments from new investors to pay old ones—your classic Ponzi scheme, the SEC says.
Gurudeo raised over $1 million from at least 14 investors between July 2007 and January 2010, lost $400,000 of investor funds through his trading and spent at least $415,000 on personal expenses, says the SEC.
To formulate his strategy, he relied on an Internet service that forecast market movements by examining lunar cycles and gravitational pull, the SEC alleges. The premise of these forecasts was that gravitational forces affect human behavior on a mass scale, which then impacts the stock market. For example, when the moon exerts a greater gravitational pull on the Earth, people get the moody blues and sell stocks.
Eric I. Bustillo, Director of the SEC’s Miami Regional Office, couldn’t resist a quip. “When Persaud blatantly liked to investors and hid their losses through a Ponzi scheme, he should have known that an SEC enforcement action was in the stars,” Bustillo wrote in the release.
The funny thing is, some financial advisors and money managers have likened technical analysis to financial astrology, and of course, Gurudeo would not be the first to try to game the market by measuring the stars and planets.