Rosy claims about stock-picking robot a scam: SEC

Twin brothers allegedly reaped millions by hawking picks of ‘Marl' to investors: '1,986,832 mathematical calculations per second'

Apr 20, 2012 @ 3:40 pm

By Darla Mercado

The Securities and Exchange Commission has charged twin brothers with running an elaborate penny stock scam involving the use of a fictitious stock-picking robot.

Thomas Edward Hunter and Alexander John Hunter, now 20, were charged with fraud Friday in the U.S. District Court of the Southern District of New York. The scheme they allegedly masterminded goes back to when the twins were just 16.

In 2007, the Hunter twins, residents of the United Kingdom, allegedly began operating a website called doublingstocks.com to help promote a newsletter. That publication purportedly had stock tips and investment analyses from a stock-picking robot, according to the SEC's complaint.

“Marl” the robot supposedly studied small stocks and predicted price directions based on past performance and could “process 1,986,832 mathematical calculations per second,” according to the complaint. The site allegedly claimed that the robot's stock analysis generated weekly returns as high as 34%.

Marl's prowess seemed believable enough: Some 75,000 investors, mostly in the U.S., shelled out at least $1.2 million for annual subscriptions to the Doubling Stocks newsletter and for copies of Marl's software, the SEC said.

Concurrently, the twins allegedly ran a website called equitypromoter.com, targeting stock promoters and playing up the duo's ability to push up the price of thinly traded penny stocks, according to the complaint. The men brought in more than $1.8 million in fees from stock promoters, the SEC alleged.

In the end, Doubling Stocks readers and purchasers of Marl's “software” were actually buying stocks that promoters paid the brothers to tout, according to the complaint.

Indeed, the recommendations, which were released around 9:30 a.m., had a dramatic effect on share prices. One company saw its share price go up 300%, from 32 cents to 82 cents.

The SEC alleged that Alexander Hunter sought bids to create the home version of Marl's “software” in 2007 and described the proposed program to freelance software coders:

“Need a small software program which will appear to the user that once running it is analyzing thousands of penny stocks. 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 SEC claims that Alexander Hunter also scalped stocks, buying up shares before releasing newsletters with Marl's “findings” and then selling the shares after the price climbed.

From 2007 to 2009, the Hunters deposited their ill-gotten gains into a bank account in the U.K. until it was frozen by British authorities in 2009, the SEC alleges. As a result, the twins asked the provider processing their newsletter subscriptions to have their fees wired to a bank account in Panama in the name of another company the Hunters controlled called Regency Investment Group Corp.

The SEC is seeking undisclosed penalties and a disgorgement of the Hunters' gains, according to the complaint.

A call to the Hunters' attorney, Eric Bruce at Kobre & Kim LLP, was not immediately returned.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

Identifying unconventional risk and finding a secret weapon in client portfolios

Advisers are hungry to find new alternative investment opportunities. But Rupal Bhansali of Ariel Investments says the secret weapon could be right under your nose - in cash.

Latest news & opinion

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print