BULLETIN: SEC Files Emergency Action In California To Halt Alleged Day-Trading Scheme Targeting Senior Citizens; Assets Of Robert C. Butler Frozen After ‘Hedge Fund’ That Purported To Have $8.9 Million Had Only $22, Agency Says

BULLETIN: A man running a day-trading and hedge-fund scheme lied about being a graduate of the Massachusetts Institute of Technology (MIT) and was ripping off senior citizens in the area of Indio, Calif., by dazzling them with technology and high-sounding company names, the SEC said in an emergency court filing.

At least 17 investors were defrauded, the SEC said.

Robert C. Butler of Bermuda Dunes, Calif., has been charged with fraud. U.S. District Judge Margaret Morrow of the Central District of California froze his assets after the SEC claimed a hedge fund purported to contain $8.9 million contained only $22.

Butler, 44, also did not disclose to investors that he filed for bankruptcy in 1998, prior to hatching the day-trading scheme. Even as his scheme was collapsing and investors were not receiving their funds, Butler was raising new money, the SEC charged.

The scheme raised at least $3.3 million by promising returns of up to 10 percent a month, the SEC charged. The fraud operated through purported funds titled the Butler Private Investment Fund, the BTl Fund and something called Hawk Performance Thrust Vector Application.

Butler accessed some of the investors’ cash at casinos, the SEC charged, alleging that Butler received “leads” from his father-in-law, who lives in the same “retirement community” as “several” of Butler’s victims. The agency did not name the father-in-law, who has not been charged.

And Butler dazzled prospects with talk about his purported “proprietary trading program” and tours of his at-home trading center that featured “multiple computer monitors,” the SEC said.

Some “notes” Butler issued to investors suggested they would receive a “guaranteed” return of 8 percent, but Butler “orally represents that that is the minimum return and that they can expect as much as 10% monthly returns,” the SEC charged.

“Butler never earned these exorbitant returns,” the SEC charged. “To the contrary, he continually loses money through his securities trading. Butler’s short-term trades and options investments are largely unsuccessful. Butler lost money in 24 of the 27 months between January 2009 and March 2011. Between January 1, 2009 and March 31, 2011, Butler’s securities trading lost approximately $1.9 million.”

Part of the scheme traded on Butler’s purported academic credentials earned at MIT, the SEC said.

But Butler “neither attended nor graduated from MIT,” the SEC said.

Read the SEC’s emergency complaint.

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