US pursues twins over stock robot scam
Twins from the north of England face a civil suit brought by US regulators over an alleged stock scam which defrauded investors out of $1.2m (£750,000).
Alexander John Hunter and Thomas Edward Hunter, from Whitley Bay in Tyne and Wear, allegedly sold access to information from fake stock-picking software called 'Marl' to around 75,000 investors, according to a suit filed by the US Securities and Exchange Commission (SEC) in a New York court on Friday.
The 'Marl' robot, taken from the first names of its fictional creators (Michael Cohen and Carl Williamson), purportedly used sophisticated analysis to pick penny stocks for companies that were due to "rocket". In reality, the twins were paid by stock promoters, and used a newsletter and a 'home version' of Marl to promote those stocks to fraudulently increase the price, according to SEC.
"In reality, the 'stock picking robot' was a work of fiction," said the suit. "The stock recommendations the defendants sent to their subscribers were not generated by any technical analysis. The stocks were instead those that the defendants had been paid by other promoters to tout."
The twins, now aged 20, were 16 when they allegedly started to develop the scam, which they marketed through a website called 'Doubling Stocks'. The separate, promoter side of the operation was marketed using the equitypromoter.com website, and took at least $1,865,000 in fees, said SEC.
"The defendants' activities followed a predictable pattern," said the suit. "They received payments from stock promoters. The defendants issued newsletters touting the stocks owned by those promoters. The promoters then took advantage of the increased prices and liquidity by selling their own shares."
The home version of 'Marl' purportedly gave home access to stock predictions, without investors having to wait for regular Doubling Stocks newsletters. The software really showed stock ticker symbols pulled from a database populated by the Hunters, said SEC.
When Alexander Hunter sought bids from developers to create a 'home version' of Marl in 2007, he specified:
"Need a small software program which will appear to the user that once running it is analyzing thousands of penny stocks.
Every so often, the software will find a stock, and a message will appear from the system tray, and on the program showing the ticker symbol.
IMPORTANT: This software does not actually find stocks at all. It should connect to my database and simply request any new stocks I have put in."
The newsletters and software prompted some large spikes in the stock prices of promoted companies, said SEC. For example, Uomo Media Inc's stock price increased by just under 100 percent (from 35 to 69 cents) after multiple newsletters between May and June 2008, dropped again to 35 cents, and then jumped 200 percent to $1.06 after promotion in May 2009. Uomo shares were trading at $20 cents at the time of writing.
The SEC is pursuing the twins "to disgorge their ill-gotten gains", to permanently disbar them from financial services, and for civil penalties.
In November, Newcastle Crown Court ordered Alexander Hunter to pay back nearly $1m after he admitted providing unregulated financial advice, according to the BBC.