US Charges English Twins Over $1.2m 'Stock Robot' Fraud

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US Charges English Twins Over $1.2m 'Stock Robot' Fraud

Posted by timothy on Saturday April 21, 2012 @09:24PM from the not-all-english-twins-of-course dept.

peetm writes "Twin brothers from England face U.S. civil charges for allegedly defrauding investors out of $1.2m (£745,000) through a bogus stock-picking robot. The twins, Alexander and Thomas Hunter, were just 16 years old when they devised the scam — which fooled around 75,000 people, according to U.S. officials."

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Had to read the article... by Anonymous Coward · 2012-04-21 21:32 · Score: 4, Insightful

Needed to figure out what exactly was bogus about this since there shouldn't be anything too wrong about someone recommending stocks that fail even with a "robot".

The Securities and Exchange Commission said the stocks "picked" were actually firms that paid the twins hefty fees
I assume it's because there's a difference between just being bad stocks and being bribed into recommending stocks.
1. Re:Had to read the article... by TFAFalcon · 2012-04-21 21:38 · Score: 4, Insightful
  
  Didn't some banks recommend people buy stocks and derivatives that they themselves were trying to get rid of? I suppose they're going to be charged with fraud too?
2. Re:Had to read the article... by cultiv8 · 2012-04-21 21:44 · Score: 4, Informative
  
  Nope.
  
  The Hunters claimed that "Michael Cohen" had developed a Goldman Sachs trading algorithm that reaped billions in profits.
  that's what they did wrong.
  
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3. Re:Had to read the article... by Anonymous Coward · 2012-04-21 23:00 · Score: 5, Interesting
  
  "Nope"
  Yes they did.
  GS recommended and sold products that they internally classified as "shitty" - while at the same time they betted on the dropping of value of those product. As expected the value of those products did drop, GS clients lost big and GS itself won big.
  It's insider trading at the highest level.
  Sen. Levin Grills Goldman Sachs Exec On "Shitty Deal" E-mail
  http://www.youtube.com/watch?v=gLx2Xc1EXLg
4. Re:Had to read the article... by DaveGod · 2012-04-22 00:05 · Score: 4, Informative
  
  Needed to figure out what exactly was bogus about this since there shouldn't be anything too wrong about someone recommending stocks that fail even with a "robot".
  
  The Securities and Exchange Commission said the stocks "picked" were actually firms that paid the twins hefty fees
  I assume it's because there's a difference between just being bad stocks and being bribed into recommending stocks.
  This is a good question, though I think you missed the answer (for the UK side of things anyway) from TFA:
  
  In November, Newcastle Crown Court ordered Alexander Hunter to pay back nearly $1m after he admitted providing unregulated financial advice. He was given a suspended 12-month prison sentence.
  
  In the UK the first mechanism to protect the public from investment-related fraud (which this blatantly is) is that if you give financial advice you have to be signed up to the Financial Services Authority. That is rigorously enforced and isn't trivial to accomplish so right off the bat they've got a very solid case against basically all the fraudsters except those that probably could make a decent living being bona fide. That's what these twins have been caught by.
  To protect against the registered guys, well signing up to the FSA subjects you to rules and by-laws (laws that only apply to specific people) which require specific things and hold you to a much higher standard than is generally applied of the public - as you can see here, the industry is heavily regulated. I don't know much on the details of the FSA rules, but at first glance these twins seem to fail more than half of the fundamental principles.
  On top of that, these guys probably could have been caught under the Fraud Act 2006 (though Wikipedia has a decent summary) since a) they made specific factual claims about their products which they knew were not true and b) as you point out they were bribed into recommending stocks - being paid to do so would actually be OK if only they'd disclosed it.
  Although punishment under the Fraud Act is more severe, and at first glance appears most appropriate given these guys were clearly intentionally defrauding their customers, it still hard to win in court whereas getting them for not being FSA regulated is easy.
  Incidentally, some of these rules cross borders in both directions - someone based overseas marketing their dodgy dealings in the UK can still be subject to UK laws, while a UK firm can be subject to UK laws while operating overseas (even if they do it via a third party based there).
  I gather the US has a very-broadly similar set of tools via the SEC.
5. Re:Had to read the article... by Opportunist · 2012-04-22 02:55 · Score: 5, Funny
  
  criminal, -s, n: Someone unable to buy laws to make his actions legal.
  
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Mechanical Turk by srussia · 2012-04-21 21:33 · Score: 4, Insightful

21st century version of the Mechanical Turk

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I knew it! by lxs · 2012-04-21 21:35 · Score: 5, Funny

Twins are evil.
They have already been tried for their "crime" by Stu101 · 2012-04-21 21:47 · Score: 4, Insightful

They have already been tried in the UK court and lost most of what the gained. It is a bid unfair in my mind.
Do you think it would be allowed, ie tried twice, once by the US government and then by the UK government if they where in the US. They would probabily get a job offer in the US.
I can't wait for the moment they get a similar issue with a Chinese coder........

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1. Re:They have already been tried for their "crime" by JaredOfEuropa · 2012-04-21 22:23 · Score: 4, Insightful
  
  Double jeopardy is about not being punished for the same crime twice. The real question is: should what they did be regarded as two separate crimes in two countries? I think one should think long and hard before answering this in the affirmative. Consider: you grab a movie from the Pirate bay, and seed parts of it to torrent peers in 15 other countries. Is it fair to be convicted in each country separately?
  
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  If construction was anything like programming, an incorrectly fitted lock would bring down the entire building...
Good one. by mrjb · 2012-04-21 21:57 · Score: 4, Insightful

£745,000. 75000 people. Fraud or not, they've scammed these people for on average just under £9.95 a person. Don't know about you, but if I found out I'd been scammed by two teenagers to the tune of a tenner for being greedy and gullible, I'd consider that a very cheap lesson and I might even have a laugh over it. Well done, Hunter twins, for making a million dollars out of greedy people. And another lesson learned: If you've got money, people get envious.

Now what I always find interesting is when the numbers don't work. According to TFA, "investors paid $47 for newsletters listing Marl's stock picks and $97 for a home version of the software". Yet on average, the investors are down just a tenner? I don't mean to nitpick, but to me that sounds like the bloody thing actually worked. Oh, wait, it was unregulated software. What would you expect from two 16-year-olds?

I'm a bit worried about the precedent this is setting though. If I choose to buy a newspaper with a horoscope in there, or if I buy horoscope software and the predictions don't come true, should I sue?

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SEC by roman_mir · 2012-04-21 22:08 · Score: 4, Insightful

So somebody gives a shit about 2, 2 bit crooks in UK. Good for them.
How about SEC not doing their job even though they've been notified multiple times about a pump and dump operation that is ran by the very definition of a pumper and dumper?
Oh, I forgot, that's the same SEC that was notified about Madoff years before his pyramid blew up. Same SEC that was absolutely useless during the Internet and the housing bubbles and now during this bond and dollar bubble. Well, I suppose later they'll come out and say: nobody could have seen it coming.

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That's unfair by obarthelemy · 2012-04-21 22:48 · Score: 4, Insightful

There was a chinese wall ! One twin was handling commission for firms, the other one recommendations to clients.
Oh wait, that's only good if you're Goldman Sachs.

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unregulated by Tom · 2012-04-21 23:42 · Score: 4, Interesting

Their main legal mistake was that they were providing unregulated financial advise.
Other than that, their business wasn't all that different from most of the others. Pretty much everyone in the financial market, big bank or small trading company, is bordering on outright fraud. Yes, I have bit of insider knowledge, from long before the crash. This has been going on for quite a while.

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Re:what about those companies by PopeRatzo · 2012-04-21 23:45 · Score: 4, Funny

This is true in England, also? I really don't know how the laws work for companies over there compared to the US corporations.
When it comes to corporations, US law is the only one that matters when it comes to protecting the company, but when it comes to tax law, Grand Cayman law is the only one that matters and when it comes to labor law, China is the only one that matters. They don't care about England.

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'put' option by KingAlanI · 2012-04-22 01:14 · Score: 4, Informative

to clarify the term: a 'put' is an option to sell at a certain price. so one makes money if the market price is lower than the option price.
It's a bet that the item's price will go down, and in this case a distrust of his banker's stock tips.
('call' option is the other way around)

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