Court halts fraudulent day-trading scheme targeting elderly

May 25, 2011--A California federal judge has frozen the assets of securities day-trading business that allegedly bilked senior citizens of about $3.3 million over a two-year period.

The Securities and Exchange Commission obtained the emergency freeze from U.S. District Judge Margaret Morrow of the Central District of California shortly after it charged Robert C. Butler with fraud.

According to the complaint, Butler, of Bermuda Dunes, Calif., operates out of his home.

He allegedly dazzled investors with his multiple computer screens and a purported proprietary trading program.

Butler promised exorbitant returns through investments in his hedge fund, but instead stole $1.6 million and lost the rest in trading, the complaint says.

The SEC alleges Butler raised the money from January 2009 to last March from 17 investors, most of whom were senior citizens living near Indio, Calif.

The complaint says Butler sent investors false account statements that grossly inflated the hedge fund balances.  One statement showed a fund balance of $8.9 million when the true balance was $22, the suit says.

Butler lied that he was a graduate of MIT and concealed from investors his Chapter 7 bankruptcy filing in 1998, the SEC says.

Despite investors’ requests, Butler has failed to return their money and continues to solicit new funds while attempting to convince them that repayments are forthcoming, according to the agency.

Butler is accused of violating the anti-fraud provision of the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Advisers Act of 1940.

The SEC is seeking preliminary and permanent injunctions, disgorgement, and fines.

Securities and Exchange Commission v. Butler, No. 11-CV-3792, complaint filed (C.D. Cal. May 3, 2011).