US Charges English Twins Over $1.2m 'Stock Robot' Fraud 114
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."
Had to read the article... (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.
Re:Had to read the article... (Score:5, 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?
Re:Had to read the article... (Score:5, Informative)
The Hunters claimed that "Michael Cohen" had developed a Goldman Sachs trading algorithm that reaped billions in profits.
that's what they did wrong.
Re:Had to read the article... (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
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I think his "Nope" was in answer to the question of them being charged with fraud (as they should be) which will never happen, not the question of whether or not they'd committed said fraud.
Re:Had to read the article... (Score:5, Funny)
criminal, -s, n: Someone unable to buy laws to make his actions legal.
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They are guilty of financial crime while poor.
There is no such thing as financial crime while rich.
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What do you mean "some" banks? I assume you really meant "most" banks?
I know one thing: whenever my (regular, non-investment) banker sends me a message recommending a stock (which in my case is very rare, only happened a few times in the last 15 years or so), the first thing I will do is buy put options on that stock. I would have made a fortune if I had done that on their last few recommendations (Lernout & Hauspie, Fortis,...)
'put' option (Score:5, 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)
Re:Had to read the article... (Score:4, Informative)
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?
No. Other than the teen twins, they did their homework and bought the proper laws first. If you do your paperwork properly (i.e. get registrated, "regulated" and put the proper disclaimers on the stuff you sell) then you can pretty much do whatever you want. Oh, and if you blow up, the government will bail you out.
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That sounds like paid advertising, the fact that people are stupid enough not to verify the independence and credibility of their sources is a separate matter... It happens all over the place too, people trust salesmen and third party organisations that are funded by the suppliers of the products they recommend, and never bother to seek truly independent advice.
Re:Had to read the article... (Score:4, Informative)
It can be very hard to find someone independant and trustworthy, which is why we have all sorts of rules, loads of legislation and pretty stiff penatlies for this sort of stuff. Otherwise assholes (of the corporate or independant variety) defraud people, like what happened here.
Re:Had to read the article... (Score:5, 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 [fsahandbook.info], 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 [fsahandbook.info].
On top of that, these guys probably could have been caught under the Fraud Act 2006 [legislation.gov.uk] (though Wikipedia has a decent summary [wikipedia.org]) 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.
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Hmm... I wonder...
Under the FSA rules... If you're a trader, and your trader pal from another company says "BP are about to lay off a million staff, get selling!", then you're immediately barred from trading BP stock because you're in a position of trust, your pal is a credible source and the information could be true, and could affect the market. You're not allowed to tell your boss (even) why you're not allowed to trade BP - you literally can't tell anyone (except your Compliance people).
On the other hand
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Deutsch Bank was a huge player in the selling of "insurance" against mortgage-backed securities. But, they were doing the selling in New York and other places as well.
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Mechanical Turk (Score:5, Insightful)
I knew it! (Score:5, Funny)
Twins are evil.
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Only one, usually the one with the beard.
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Only one, usually the one with the beard.
But Golbez didn't have a beard!
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What about the Doublemint twins?
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Twins are evil.
Not if they're gorgeous bisexual female porn stars.
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In that instance, it appears only one is evil, not both. It's an "evil twin" scenario.
what about those companies (Score:2)
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This is true in England, also? I really don't know how the laws work for companies over there compared to the US corporations.
Re:what about those companies (Score:5, Funny)
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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I would like to think that you are joking but it really sounds like you are genuinely stupid.
You're the genuinely stupid one if you can't tell when someone is joking even after you've thought about it.
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When punishments are involved a company isn't considered a person.
What is it exactly that you propose? If someone (or mulitple someones) in the company do something illegal, every employee of the company should be personally fined and/or sent to jail? Or maybe the exact nature of the transgression should be taken into account, with specific individuals prosecuted (which already happens), or with wide-spread-enough crimes causing direct regulatory take-over of the company (which already happens) after huge fines are paid (which already happens) and sometimes the dissoluti
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No. Fine the company, and if jail time is involved, forbid it to be public traded (or even forbid any kind of commercial activity) for the jail time period.
If the company then wants to go after the guy who is liable for it, they may do so themselves.
Re:what about those companies (Score:4, Interesting)
However, that does not appear to be how actual courts find according to the newspapers. I don't know if the law has changed, or if the courts have difficulties with reality.
My local government department claimed they would plead "corporate insanity" if prosecuted for being reckless, but I have it on good legal advice that corporate pleas of insanity are not recognised in the UK.
Disclaimer: If you sue me, I will lead insanity too.p
They have already been tried for their "crime" (Score:5, 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........
Re:They have already been tried for their "crime" (Score:5, Insightful)
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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?
Don't give the RIAA and MPAA execs ideas. Imagine receiving multiple copies of their standard legal shakedown letters, each threatening a copyright lawsuit in a different jurisdiction where you may have been infringing.
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No, it's what it says: being put in jeopardy for the same (alleged) crime twice. It's why (in the US) you can appeal your conviction, but the government may not appeal your acquittal. (Supposedly. In practice, if there is sufficient public outcry to string you up, you will be tried again for a "different crime," such as violation of a hate-crime law.)
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When you are charged with a crime, at its most basic, it is like a class action lawsuit against you, filed on behalf of the people of the jurisdiction. Even though many crimes have an actual victim (the guy whose jaw you broke, for example), the nominal victim is the people of the jurisdiction. In
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However, civil suits are excluded from this clause: in your transmitter example you can o
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Is it fair not to be? Or at least, for these countries to co-ordiante at who gets first crack, or whose conviction will be "good enough" for all?
Otherwise, I declare a country called Buttfucksontia. My country's copyright laws are international. If you are accused and convicted of copyright infringement, your punishment is to be called a jerkface.
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Now all you need to do is amass an army big enough to tell the U.N. to go to hell.
Re:They have already been tried for their "crime" (Score:4, Insightful)
Wrong, the crime was committed in the UK. They were in the UK when they committed it therefore that is where it was committed. Just because your government is prone to logical fallacies does not mean that you all have to act stupid.
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As long as the crimes are truly separate then I don't see a problem with them being tried twice. Let's say that they were charged with defrauding X people in the UK, and they will be charged with defrauding Y people in the US. As long as those two sets don't have common members then prosecute away.
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They have already been tried in the UK court and lost most of what the gained.
They were only fined about 1/3 of their total profit, they're still about $2million ahead. And they should face criminal charges in every country where they committed a crime.
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Actually, US military personnel have always been subject to double-, or even triple- jeopardy. They can be punished by military law and regulation, U.S. federal law, and if it happened in a foreign country involving native peoples, their laws also.
The government loves sending troops "over there", where ever "there" is this week, but the troops *really* don't want to go once they find out that they are in as much danger from bureaucrats as they are bullets. Not trusting others comes easy, but when you can't
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I can't wait for the moment they get a similar issue with a Chinese coder........
If it happens in China and Chinese lose money, he's dead. If foreigners lose money, he continues to work (defraud).
These punks were just too crude and didn't have the right connections and paperwork to cover their asses. Take a look at reverse mergers; they nearly all lose money for the retail suckers, err, I mean investors. That's when crooked Chinese businesses (yes, that's a very redundant term) collude with crooked American stock underwriters (again, a redundant term) to sell stock based on fraudule
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Actually the black robed priests of our illustrious and fault free US supCt have ruled that you can be tried twice for the same crime if it is prosecuted in two different jurisdictions. You can be busted for pot in Maryland, convicted in state court, then convicted in Federal court and serve both sentences serially. If there is a weasels hair of an innocent sounding line in a treaty or binding agreement or someone thinks there is then you can be extradited and disappear.
Also you can get convicted, have a he
Good one. (Score:5, Insightful)
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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That's the difference between the stock market and fortune tellers/horoscopes- the 1st one you're legally expected to tell the truth, the 2nd one you're expected to... um, say nice things? If the fortune teller has soft hands then maybe nicer things?
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If enough people used the software then their numbers alone could start a small bubble on whatever stock the kids picked. As they were in for quick gain most of them left before the prices have returned to normal. So they could gain something, at the expense of other people on the market.
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?
In some places, you might [telegraph.co.uk].
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Even if the victims deserved to lose, these guys didn't deserve to gain anything, and so while I probably wouldn't let this worry me too much if I was a victim, I can't say it worries me too much that they *are* going to be punished either.
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I do think there's a difference. Stealing £10 from 75,000 people causes 75,000 people skip the cinema this week. Maybe not even that. Stealing £750,000 from one person might cost that person his or her home and retirement. A person harmed in this way might not ever be able to recover. People have thrown themselves in front of trains for less. I suspect fewer have done so over 10 quid. There's a "lives destroyed" weight multiplier that must be factored in. Sort of ((number of people) x (amount lo
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I do think there's a difference. Stealing £10 from 75,000 people causes 75,000 people skip the cinema this week. Maybe not even that. Stealing £750,000 from one person might cost that person his or her home and retirement. A person harmed in this way might not ever be able to recover. People have thrown themselves in front of trains for less. I suspect fewer have done so over 10 quid. There's a "lives destroyed" weight multiplier that must be factored in. Sort of ((number of people) x (amount lost average) x (number who can't recover)). Not exactly, of course. Many missing factors. If only it were that simple!
But regardless, still a crime either way.
But anyone who is scammed out of GBP 750,000 can probably afford it too. You don't generally get even the greediest person to gamble all their savings on a money making scam. I would imagine the sort of person who could afford to take a punt on three quarters of a million would have several millions in reserve.
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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?
I'd join. If just for the entertainment value of finding out what they come up with in their defense.
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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
I met such a 'greedy and gullible' person once. Only that he was not greedy at all. He was a 70 year old caretaker of the property I rented a room in. His wife was seriously ill, his car was breaking down, he was always looking for quick jobs - you get the picture. He asked me to help him type something in a computer and send some e-mail. Turned out he was about to jump on a scam.
I would not even call him 'gullible'. He was just desperate and dealing with something out of his experience. I explained him th
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But just because A is not as bad as B does not mean that A is good. I'd rather have a finger shot off than be killed outright, but that certainly doesn't mean I'd be happy with losing my finger.
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Well done, Hunter twins, for making a million dollars out of greedy people.
You could say the same thing about any fraud or con.
perfect (Score:2, Interesting)
they should be hired to run the government programs, such as health insurance, social security, etc. In fact Strategic Hazard Intervention Economics Logistics Directorate agency could be created with all of these guys, including Bernie Madoff as the program's director.
SEC (Score:5, Insightful)
So somebody gives a shit about 2, 2 bit crooks in UK. Good for them.
How about SEC not doing their job [slashdot.org] 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.
Re:SEC (Score:4, Insightful)
SEC only goes after someone when one of their own gets shafted. Us little pissants are not worthy of their attention.
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I'd go one further, the SEC only goes after parties its sure it can defeat. I'm sure there are other criteria, too, such as policies which state that SEC enforcement actions cannot have a "deleterious effect on market conditions" which means that they will only go after large players in limited ways, since something like nailing Goldman Sachs to the wall may hurt overall market activity.
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The US will wage wars to keep the dollar strong,
- what the hell does this mean? The government's and the Fed's policy is destruction of the currency unless you didn't notice, so if a war has to start to keep it strong, then it has to be a war against the government and the Fed.
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That's right, it's a dollar bubble. Every bond that is bought is another dollar.
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Dollar bubble? The dollar is worth less to comparible countries than it has been since I've been alive.
And it's still far above its true value. US dollar is backed by by "those crooks can't print dollars much faster than the whole world makes products, can they?"
That's unfair (Score:5, 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.
This doesn't sit right with me. (Score:2)
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As long as the charges are for a distinct offense, double jeopardy does not apply. Review the definition of double jeopardy carefully. And double jeopardy hardly applies to US courts for UK convictions.
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Are you SURE it doesn't apply to US courts for UK convictions?
IANAL and I am not 100% sure, but my understanding is that in a UK criminal court (and most others) if you are convicted you can ask for other cases to be taken into consideration, which means that the sentence included these. My understanding from extradition cases where people ask to be charged in the UK to avoid being extradited somewhere else is that if you are convicted and punished in one country for an offence you can not be extradited and charged criminally for the same offence somewhere else
So I
unregulated (Score:5, 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.
Surely 1.2 millidollars is barely petty theft (Score:1)
How is that worth international intrigue?
Brilliant (Score:2)
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It's like running the state lottery vs. an illegal numbers game. They're both gambling, and I wouldn't be totally surprised if the illegal one is run more honestly. One is legal because the state gets their cut.
How about the other frauds? (Score:2)
Here's a few: