by Bill Singer
More Lord Voldemort Than Harry Potter In British Teens' Securities Fraud
April 23, 2012
Lord Voldemort attacks the securities markets
Thomas Edward Hunter and Alexander John Hunter are now twenty-year-old twin brothers and citizens/residents of the United Kingdom. These two young men are co-owners and operators of Global Marketing Corporation Ltd.("GMC"), a United Kingdom company formed in 2007, with five shares of GMC stock issued as follows: one to Thomas, one to Alexander, one to mom, one to dad, and one to their older brother. As to the business of GMC, it owned and operated several securities-related websites, including
- doublingstocks.com,
- daytradingrobot.com, and
- equity promoter.com.
The brothers Hunter dissolved GMC on May 25 ,2010. Also, Regency Investment Group, a Panamanian corporation, is owned by Alexander but both twins have a power of attorney.
Bill Singer
Okay, do me the favor - do the math. You got two 20-year-olds. It's now 2012. 2007 was five years ago. So these kids were, what, 15 or 16 when they started GMC?
Now it gets truly bizarre.
Voldemort Takes Over
On April 20, 2012, the Securities and Exchange Commission ("SEC") filed a Complaint in the United States District Court for the Southern District of New York charging the Hunter brothers with defrauding approximately 75,000 investors through an Internet-based pump-and-dump scheme in which they touted a fake "stock picking robot" that purportedly identified penny stocks set to double in price. The Complaint charges the brothers were merely touting stocks they were being paid to promote. The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and financial penalties. SEC v. Thomas Edward Hunter and Alexander John Hunter, Defendants; and Regency Investment Group, Corp., Relief Defendant (SDNY, 12-CIV-3123 April 20, 2012).
NOTE: A Complaint contains allegations and the defendants are presumed innocent unless and until proven guilty in a court of law.
Marl the Robot . . . or Decepticon?
The Complaint alleges that the Hunters created the Doublingstocks.com and Daytradingrobot.com websites as part of a scheme. Allegedly, the websites touted that a former trading algorithm programmer from a large investment bank had designed a stock picking robot that they named " Marl." That name was purportedly derived from the combination of the first names of alleged inventors, Michael Cohen and Carl Williamson.
Geez - two 16-year-old kids came up with that plan? Come to think of it, why not? Sort of sounds like Harry Potter meets the Transformers and they all went over to the darkside.
According to the Complaint:
19. On doublingstocks.com, the defendants claimed that Cohen "developed the famous ‘Global Alpha' computer stock trading model" as a contractor for the Goldman Sachs Group, Inc. ("Goldman Sachs"). The Global Alpha program, the defendants claimed, in "most years is responsible for $4,000,000,000+ Annual Trading Profit."
20.The defendants' representations about "Michael Cohen" were false. No such employee or contractor worked in that capacity at Goldman Sachs.
Anyway, Marl the Robot was apparently described as having the ability to analyze the over-the-counter securities markets and identify penny stocks that were set to experience large price increases. The Doublingstocks.comwebsite allegedly promised 34% weekly returns. Having been bitten by the unbridled bug of Capitalism, the two kids then offered investors paid subscriptions to Marl's stock picks via their e-mail newsletter.
Dark Lord Sauron Steps In
Taking things a step further, the Complaint charges that the Hunters expanded their online network of nefarious fraud by creating the Equitypromoter.com website - the third jewel in their crown. This website marketed the twins' newsletter subscriber list to penny stock promoters. Frankly, that's pretty impressive for a couple of teenagers. Not only did they allegedly come up with the stock pickin' robot and two subscriber websites but now they're leveraging their empire by selling the subscriber lists. The Complaint characterizes this next step as one in which the kids "boasted" that "One email to this list of people rockets a stock price."
According to the Complaint, the Hunters were paid at least $1.865 million in fees from known or suspected stock promoters, and they did not disclose to their newsletter followers the conflicting relationship between their two businesses.to send selected penny stock ticker symbols to their subscribers. Apparently, the twins kept up the drumbeat about how Marl the Computer Stockpicker was finding this low-priced stocks when, according to the SEC, the kids were simply pumping whatever stocks they were getting paid to promote.
The Complaint alleges that near the beginning of the trading day, around 9:30 a.m. ET, the Hunters disseminated their newsletters, with the resulting effect that the price and volume of the promoted stocks spiked dramatically as newsletter subscribers rushed to purchase shares; however, the stocks typically fell precipitously shortly thereafter. I imagine that a number of subscribers who bought early and held on as the debris of their purchases plummeted earthward were not that impressed with Marl the Robot. This failure to maintain the pumped prices might explain this allegation in the Complaint:
41. The defendants had tens of thousands of newsletter subscribers. Subscription fees alone netted the defendants over $1.2 million from April 27, 2007 to July 9, 2009. In July 2009, the company that processed the defendants' subscription sales terminated its relationship with the defendants as a result ofthe high number of complaints and refund requests by Doubling Stocks subscribers.
Stock Wars: The Home Version
One of my favorite allegations by the SEC is that the Hunters offered a downloadable version of Marl for $97. That's great! I mean, you know, I could have the stock pickin' robot on my own computer in my own house and get the tips before everyone else. In theory, perhaps okay - in reality, consider these allegations in the Complaint:
37. Defendant Alexander John Hunter, in seeking bids to create the software in 2007, described the requirements for the software to freelance software coders as follows:
Need a small software program which will appear to the user that once running it is analyzing thousands ofpenny 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. Itshould connect to my database and simply request any new stocks I have put in.
* * *
Basically this is almost a "fake" piece ofsoftware and needs to simply appear advanced to the user. . .
Oops - they put that in writing? Uh oh.
The Decepticons
These two Decepticons allegedly received at least $1.2 million from investors primarily in the U.S. who paid $47 apiece for annual newsletter subscriptions and the home version robot software. No, it's not MF Global or Madoff. And no, this didn't come to us from some veterans traders at Merrill Lynch, Morgan Stanley, JP Morgan, or Wells Fargo. This is the brainstorm of a couple of teenagers, albeit now grown up. There's funny and then there's not-so funny. You figure out which this case is. On the other, you might want to wait for the movie, video, and computer game versions that should be out soon.