SEC Charges Nationally Known Psychic
in Multi-Million Dollar Offering Fraud
SEC v. Sean David Morton, Vajra Productions, LLC, 27 Investments, LLC,
and Magic Eight Ball Distributing, Inc., defendants, and
Melissa Morton and Prophecy Research Institute, relief defendants,
Civil Action No. 10-CV-1720 (SDNY) (DC)
SEC Litigation Release No. 21433 / March 4, 2010
On March 4, 2010, the Securities and Exchange Commission (Commission) filed a civil injunctive action in the United States District Court for the Southern District of New York charging Sean David Morton, a nationally-recognized psychic who bills himself as "America's Prophet," and three corporate entities that Morton co-owns, for engaging in a multi-million dollar offering fraud. Beginning in or around the summer of 2006, Morton solicited individuals to invest in one of several companies he and his wife, Melissa Morton, controlled – defendants Vajra Productions, LLC, 27 Investments, LLC, and Magic Eight Ball Distributing, Inc. (referred to herein as the Entities and, along with Morton, referred to as the Defendants) – under the umbrella of the Delphi Associates Investment Group (Delphi Investment Group). According to the Commission's complaint, in soliciting these individuals, Morton claimed that he would use his psychic expertise to provide investment guidance to his investing team, and he falsely touted his historical success in psychically predicting the various rises and falls of the market. Morton further claimed that he would use the pooled funds to trade in foreign currencies and distribute pro rata the trading profits among the investors. However, according to the 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, and that the profits in the accounts were audited and certified. All together, Morton fraudulently raised more than $6 million from more than 100 investors for the Delphi Investment Group.
According to the Commission's complaint, Morton used his monthly newsletter, his website, his appearances on a nationally syndicated radio show called Coast to Coast AM, 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. For example, Morton wrote to potential investors in his July 20, 2006 newsletter that: "I have called ALL the highs and lows of the market, giving EXACT DATES for rises and crashes over the last 14 years." (emphasis in original.) The Commission alleges that this assertion, like others Morton made in soliciting investors, is false.
Further, according to the complaint, Morton, who did not seek accreditation status from the Delphi Investment Group investors, placed investor funds in the bank accounts of one of the Entities, and that Morton and/or Melissa Morton, commingled the investors' funds among the Entities' accounts. Additionally, according to the complaint, while Morton promised investors that all of their funds would be used to trade foreign currencies, in fact, he invested only about half of the funds with foreign currency trading firms. Unbeknownst to the investors, instead of investing all of the funds into foreign currency trading firms, Morton, and/or Melissa Morton, 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). Melissa Morton and PRI are named as relief defendants (Relief Defendants) in the complaint.
The Commission'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 complaint further charges that the Relief Defendants were unjustly enriched by receiving investor funds. The complaint 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 civil penalties. The complaint also seeks a final judgment ordering the Defendants and Relief Defendants to provide a verified accounting.
This article was posted on December 15, 2010.