BIG RETURNS MIGHT HAVE BEEN A SECURITIES FRAUD TARGETING SENIORS

The following case is an excerpt from the SEC web site:

“Litigation Release No. 21959 /May 5, 2011
Securities and Exchange Commission v. Robert C. Butler, United States District Court for the Central District of California, Case No. 11-03792 MMM (FFMx) (filed May 3, 2011)
SEC HALTS FRAUDULENT DAY TRADING SCHEME TARGETING SENIOR CITIZENS
The Securities and Exchange Commission obtained an emergency asset freeze and court order to halt an ongoing securities fraud being orchestrated by Robert C. Butler of Bermuda Dunes, Calif.
The SEC alleges that from January 2009 to March 2011, Butler raised approximately $3.3 million from at least 17 investors who were mostly senior citizens living in or around Indio, Calif. He operated out of his home and dazzled investors with his multiple computer screens and a purported proprietary trading program that he claimed to use in his day trading business. Butler promised exorbitant returns to investors through investments in his hedge fund, but instead stole $1.6 million and lost the other half of investor funds in his securities trading.
The SEC’s complaint alleges that Butler sent falsified account statements to investors in order to conceal his fraud, and grossly inflated the hedge fund balances. According to one statement, the fund balance was $8.9 million compared to the true balance of merely $22. The SEC further alleges that Butler lied that he was a graduate of MIT and he concealed from investors his Chapter 7 bankruptcy filing in 1998. Despite investor requests, Butler has failed to return their money and instead continues to solicit new funds and lull existing investors into believing that repayments are forthcoming.
The Honorable Margaret Morrow, United States District Judge, granted the SEC’s application for emergency relief and froze the defendants’ assets. On May 11, 2011, the court will hold a hearing on the SEC’s motion for a preliminary injunction.
The SEC’s complaint charges Butler with violating the antifraud provisions, Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), 206(2) and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, of the federal securities laws. In addition to the emergency relief, the complaint seeks preliminary and permanent injunctions, disgorgement, prejudgment interest, and financial penalties.
The SEC’s investigation was conducted by Janet Weissman and Katharine Nolan in the Los Angeles Regional Office, and David Van Havermaat will lead the SEC’s litigation.”