The Securities and Exchange Commission (SEC) has charged a self-proclaimed psychic who fraudulently raised $6 million after telling investors he could predict stock market highs and lows.
The SEC’s charges were filed in U.S. District Court for the Southern District of New York last week against Sean David Morton, who bills himself as “America’s Prophet,” as well as three corporate entities that Morton co-owns with his wife Melissa Morton under the umbrella of the Delphi Associates Investment Group.
According to the SEC’s complaint, Morton began soliciting investors around the summer of 2006 by telling them that he would use his psychic expertise to provide investment guidance to his investing team. According to the SEC, in one newsletter to potential investors, Morton falsely stated: “I have called ALL the highs and lows of the market giving EXACT DATES for rises and crashes over the last 14 years.”
Morton used his monthly newsletter, his Web site, his appearances on a nationally syndicated radio show, and appearances at public events to promote his psychic abilities. Morton made numerous materially false representations relating to his psychic abilities in order to solicit investors for the Delphi Investment Group.
“Morton’s self-proclaimed psychic powers were nothing more than a scam to attract investors and steal their money,” said George S. Canellos, Director of the SEC’s New York Regional Office, in a press release.
The SEC alleges that Morton told investors he would pool their funds to trade in foreign currencies. However, according to the SEC's complaint, Morton lied to investors about his past successes and about key aspects of the Delphi Investment Group, including the use of investor funds and the liquidity of the funds. He falsely claimed that the profits in the accounts were audited and certified.
According to the SEC's complaint, Morton fraudulently raised more than $6 million from more than 100 investors for the Delphi Investment Group. Morton invested only about half of the funds with foreign currency trading firms. Unbeknownst to investors, instead of investing all of the funds into foreign currency trading firms, Morton or his wife diverted some of the investor funds. For instance, the Mortons diverted at least $240,000 of investor funds to their own nonprofit religious organization, Prophecy Research Institute (PRI), according to the SEC.
Melissa Morton and PRI are named as relief defendants in the SEC's complaint. Corporate entities co-owned by Morton who are charged as defendants in the SEC's enforcement action are Vajra Productions, LLC, 27 Investments, LLC, and Magic Eight Ball Distributing, Inc.
The SEC's complaint charges each of the defendants with violations of Sections 5(a), 5(c) and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC’s complaint further charges that the relief defendants were unjustly enriched by receiving investor funds, and seeks a final judgment permanently restraining and enjoining the defendants from future violations of the above provisions of the federal securities laws. The complaint further seeks a final judgment ordering the defendants, jointly and severally, to disgorge their ill-gotten gains plus prejudgment interest, ordering the relief defendants to disgorge their ill-gotten gains plus prejudgment interest, and ordering the defendants to pay financial penalties.
The complaint also seeks a final judgment ordering the defendants and relief defendants to provide a verified accounting.