BULLETIN: SEC Says British Twin Brothers Started ‘Pump And Dump’ Fraud As Teens And Pushed Fake ‘Stock-Picking Robot’; Combined Scams Allegedly Generated Millions

BULLETIN: The SEC has gone to federal court in New York, alleging that 20-year-old British twin brothers Thomas Edward Hunter and Alexander John Hunter started an elaborate online fraud scheme when they were 16 and netted millions of dollars.

At least three Hunter websites were involved in the fraud, according to the SEC: DoublingStocks.com, DayTradingRobot.com and EquityPromoter.com. The EquityPromoter site allegedly was a stock-touting site that fueled the fraud.

Part of the alleged pump-and-dump scam centered on a fake “stock-picking robot” dubbed “Marl,” which purportedly chose stocks that would double in price, featured “evolutionary framework” and was was capable of making “1,986,832 mathematical calculations per second.”

Despite the impressive-sounding claims, the SEC charged, no robot was making real picks. Instead, the software just regurgitated stock symbols that had been entered into a database in advance and were linked to penny stocks the brothers were being paid secretly to hype.

“Marl” formed its name from its purported inventors, Michael Cohen and Carl Williamson, the SEC charged. Cohen, the agency added, was positioned in the Hunter promos as the developer of the “famous ‘Global Alpha’ computer stock trading model” as a contractor for the Goldman Sachs Group Inc.”

Representations about Michael Cohen “were false,” the agency alleged.

“[N]o such employee or contractor worked in that capacity at Goldman Sachs,” the SEC charged.

“The Hunters used the anonymity of the Internet and the promise of easy riches to prey on investors,” said Thomas A. Sporkin, chief of the SEC’s Office of Market Intelligence. “While touting their supposed breakthrough investment technology on two websites, the Hunters were racking up fees as stock promoters through a third.”

A downloadable version of the purported “Marl” robot was offered online by the Hunters for $97, positioned alongside a $47 newsletter subscription, the SEC alleged.

“The defendants claimed that the home software performed the same sophisticated analyses that purportedly underlay the defendants’ newsletter [stock] selections, but with the added benefit that investors would not have to wait for the emailed newsletters to capitalize on Marl’s analytic capabilities,” the agency alleged.

In reality, the agency charged, “the home software was designed to retrieve predetermined stock ticker symbols from a database that the defendants populated to deliver those tickers to investors on dates set by the defendants.”

In 2007, the SEC said, Alexander John Hunter sought bids from programmers to build the software. Here, according to the agency, is how the programming solicitation read (italics added).

“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 solicitation, according to the SEC, went on to say this (italics added):

“Basically this is almost a ‘fake’ piece of software and needs to simply appear advanced to the user . . . “

Various references to the purported miracle robot appear online. One such reference viewed today by the PP Blog appeared on Squidoo, a social-networking site. When the Blog clicked on a “Marl” link at the Squidoo site, it was forwarded to a Clickbank hoplink that included this message (italics added):

“This site is no longer in service or has been disabled due to a terms of service violation.”

Clickbank is an online retail outlet for digital products and affiliate marketers. The company is not referenced in the SEC complaint, and has not been accused of wrongdoing.

“Marl” also was touted from MySpace, another social-networking portal. A “Marl” video with a URL containing a Clickbank hoplink appears on a MySpace page viewed today by the PP Blog, but generated a “This site is no longer in service or has been disabled due to a terms of service violation” error message when entered in a browser window.

Promos for “Marl” also appeared on the TalkGold and MoneyMakerGroup Ponzi forum, according to research.

It was not immediately clear if the Hunters were responsible for the Clickbank promos or whether other individuals also were selling “Marl” through Clickbank.

The Hunter brothers, the SEC charged, were running scams within scams.

“The SEC alleges that the brothers separately created the website Equitypromoter.com where they marketed their newsletter subscriber list to penny stock promoters and boasted, ‘One email to this list of people rockets a stock price,'” the agency said. “The Hunters were in turn paid to send selected penny stock ticker symbols to their subscribers, who were misled to believe that the stock ‘picks’ were the product of the robot. The Hunters sent out their newsletters near the beginning of the trading day, and 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, leaving investors with shares worth less than they had purchased them for earlier in the day.”

All in all, the newsletter component of the scam fetched “at least” $1.2 million at $47 a pop, the agency alleged.

Beyond that, 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,” the agency alleged.

How much the “robot” component of the scam allegedly fetched was not immediately clear, but the product was offered at $97, according to the SEC.

Named a relief defendant in the SEC case against the Hunters was Regency Investment Group Corp. The agency described it as a “Panamanian company owned by defendant Alexander John Hunter and over which defendants Alexander John and Thomas Edward Hunter jointly have power of attorney.”

In general, a company is named a relief defendant when there is reason to believe it has received ill-gotten gains from a scheme.