Investment 'Psychic' Accused of Financial Fraud

March 8, 2010 — -- Note to investors: If someone claims to be a prophet and promises to win you money by predicting changes in the stock market, don't walk away. Run.

But unfortunately over 100 investors did not run away when Sean David Morton -- who dubbed himself "America's Prophet" -- asked for their money. In all, investors gave Morton more than $6 million in the hopes that he would use his alleged psychic abilities to win big money in the market.

Just last week Morton was charged with investor fraud by the Securities and Exchange Commission. He has not responded to the complaint yet. E-mails and calls to his company's office were not returned.

"Sean David Morton lured scores of investors with his lies and then stole their hard-earned money," Sanjay Wadhwa, assistant director of the SEC's New York Regional Office, told ABC News. "Our enforcement action ensures that his money manager days are over."

Morton's case is just the latest example in a long line of Ponzi schemes, scams such as Bernie Madoff's that schemers use to pry money from unsuspecting investors.

After the financial crisis, federal regulators are now uncovering so many of these scams that last year one regulator said it was "ponzimonium out there."

Bart Chilton, commissioner of the Commodity Futures Trading Commission, said in a statement last year that ponzi schemes are now "drying up like late summer cow pies" because investors are more vigilant about the scams and -- cash-strapped by the recession -- are requesting access to their investments.

"Redemptions are really a buzz kill for many ponzi scam operators," Chilton said.

Take the case of Morton.

In the summer of 2006 Morton started to solicit investors by promising to use his psychic abilities for investment guidance, the SEC alleged in their complaint.

"I have called all the highs and lows of the market, giving exact dates for rises and crashes over the last 14 years," Morton said in a newsletter to potential investors. Along with his newsletter, Morton also used his Web site, public speaking engagements and appearances on a nationally syndicated radio show to promote his Delphi Investment Group.

Some Investments Diverted to Sean David Morton's Nonprofit

"Morton's self-proclaimed psychic powers were nothing more than a scam to attract investors and steal their money," said George Canellos, director of the SEC's New York Regional Office.

Morton promised to invest the funds with foreign currency trading firms, but only used about half the money for that purpose, while diverting some of the funds, including at least $240,000 into his and his wife's nonprofit religious organization, Prophecy Research Institute.

Morton, his wife Melissa Morton and three corporate entities that they own under the umbrella of the Delphi Associates Investment Group were the subject of the SEC charges.

In a biography posted on the Delphi Web site, Morton describes himself as "a natural psychic" and "intuitive consultant" and "investigative reporter." He claims to be able to predict "future occurrences and trends such as earth changes, political events, and stock market fluctuations."

"He has an astounding 'hit rate' or percentage of success," the Web site states.

Back in 1985 Morton says he went on an around-the-world spiritual quest after he grew tired of life in Los Angeles. He went to India, England, Ireland and Nepal -- where he lived for eight months at a monastery. There, Morton "learned time travel or the ability to view events in the past and future," the Web site says.

That helped Morton develop his "Spiritual Remote Viewing System." The system then helped Morton predict the 1989 San Francisco earthquake, the impeachment case against former President Clinton and the 2000 controversy over the election of former President George W. Bush, the Web site claims.

"He also predicted exact dates for the post-'90s decline of the DOW and NASDAQ and has given the exact levels and timing of their subsequent rise and fall," the Web site says.

But a few years ago federal investigators learned about Morton when a disgruntled investor approached them after losing money. The investigators soon started to spot inaccuracies in Morton's self-proclaimed investment success.

Sean David Morton's 2009 Lawsuit Against Two SEC Officials, Attorney General Dismissed

One unusual element was that Morton did not claim to have any financial know-how -- just psychic abilities that helped him predict the future.

The lesson from the Morton case, regulators say, is that investors should make sure that the person asking to manage their money is licensed before handing over funds, cautioning that it is a risky strategy to entrust someone such as Morton who is making these types of claims.

If it sounds too good to be true, officials say, then it probably is.

As federal investigators pursued Morton early last year, the self-proclaimed psychic responded by taking action of his own.

In March of 2009, Morton and his wife filed a lawsuit in federal court in the central district of California against two SEC officials and U.S. Attorney General Eric Holder.

The opening paragraph of their 30-page complaint alleges that the two SEC officials are "dishonest and incompetent SEC employees who apparently need to justify a trip to California in order to visit Disneyland and eat In & Out burgers at the taxpayers' expense.

"That the plaintiffs will be indicted is a foregone conclusion regardless of guilt or innocence due to a directive issued by the first Bush administration in 1989," Morton and his wife argued.

The Mortons' suit was later dismissed, but at least Morton did appear to correctly predict one future event: He and his wife were indeed charged with investor fraud.