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Crime The Almighty Buck United Kingdom

US Charges English Twins Over $1.2m 'Stock Robot' Fraud 114

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

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  • by Anonymous Coward on Sunday April 22, 2012 @05:32AM (#39761213)

    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.

    • by TFAFalcon (1839122) on Sunday April 22, 2012 @05:38AM (#39761227)

      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?

      • by cultiv8 (1660093) on Sunday April 22, 2012 @05:44AM (#39761245) Homepage
        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.

        • by Anonymous Coward on Sunday April 22, 2012 @07:00AM (#39761441)

          "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

        • by sjames (1099)

          They are guilty of financial crime while poor.

          There is no such thing as financial crime while rich.

      • 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,...)

      • by Tom (822) on Sunday April 22, 2012 @07:46AM (#39761571) Homepage Journal

        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.

      • Yes, banks in the States did the same thing, but this article is about a "civil" action, not a criminal one, so, there are no "charges", per se, even though they will try to show how the fraudulent activity worked, in order to get a financial judgment against the twins. The plaintiffs want their money back; they don't care about jail time, etc.
    • by Bert64 (520050)

      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.

    • by DaveGod (703167) on Sunday April 22, 2012 @08:05AM (#39761631)

      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.

      • by coofercat (719737)

        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

    • The "robot" didn't exist. If they'd stuck to using astrology or reading tea-leaves they'd probably still be going strong but inventing a fictitious robot was just criminal.
  • Mechanical Turk (Score:5, Insightful)

    by srussia (884021) on Sunday April 22, 2012 @05:33AM (#39761215)
    21st century version of the Mechanical Turk [wikipedia.org]
  • I knew it! (Score:5, Funny)

    by lxs (131946) on Sunday April 22, 2012 @05:35AM (#39761219)

    Twins are evil.

  • Shouldn't the companies that paid them to get featured in their app be charged as well?
  • by Stu101 (1031686) on Sunday April 22, 2012 @05:47AM (#39761253) Homepage

    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........

    • by tomhath (637240)

      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.

    • 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

    • by El Torico (732160)

      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

    • by mrmeval (662166)

      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)

    by mrjb (547783) on Sunday April 22, 2012 @05:57AM (#39761271)
    £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?
    • Re: (Score:3, Funny)

      by jaymemaurice (2024752)
      Your mathematics and/or facts are not welcome at this trial. BURRN THE WITCH!
      • Some participants can and will make money in a pump and dump scam... success does not make it ethical... but ethics in the stock market where everyone is trying to make money simply because they have/have someone elses money? Seriously?!
    • by bryan1945 (301828)

      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?

    • by Hentes (2461350)

      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].

    • by 91degrees (207121)
      Still, I think this is behaviour I'd rather discourage.

      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.
    • by genik76 (1193359)
      I don't think there's a moral difference between scamming 10 pounds (or whatever unit of currency) from 75000 people and scamming one person 750000 pound. The damage is the same, just distributed differently.
      • Re: (Score:3, Insightful)

        by Anonymous Coward

        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

        • by tehcyder (746570)

          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.

    • by Tom (822)

      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.

    • 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

      • by tehcyder (746570)
        I think the OP's point was that you're really not going to shoot yourself over a tenner.

        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.
    • by tehcyder (746570)

      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)

    by roman_mir (125474)

    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)

    by roman_mir (125474) on Sunday April 22, 2012 @06:08AM (#39761307) Homepage Journal

    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)

      by bryan1945 (301828) on Sunday April 22, 2012 @06:29AM (#39761351) Journal

      SEC only goes after someone when one of their own gets shafted. Us little pissants are not worthy of their attention.

      • by swb (14022)

        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.

    • Dollar bubble? The dollar is worth less to comparible countries than it has been since I've been alive.
      • by roman_mir (125474)

        That's right, it's a dollar bubble. Every bond that is bought is another dollar.

      • by Alex Belits (437) *

        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)

    by obarthelemy (160321) on Sunday April 22, 2012 @06:48AM (#39761393)

    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.

  • They have already faced criminal charges in the UK, so they cannot face them again in the USA. What the U.S. Securities and Exchange Commission has done is bring a civil case against them. Now I am not sure why this feels wrong to me, because I would be very happy for the UK investors who lost out to bring a civil case against them, but having a government agency do it to someone who has already faced criminal charges just feels wrong.
    • 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.

  • unregulated (Score:5, Interesting)

    by Tom (822) on Sunday April 22, 2012 @07:42AM (#39761549) Homepage Journal

    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.

  • How is that worth international intrigue?

  • This is awesome, at least the project is. Did these brothers really defraud anyone? Think about it, they offered stock advice which caused a change in the stock market, stock brokers do the same thing and there no more accurate. If your going to charge these twins then you need to charge every single broker who has ever lost money by making bad stock picks because in a sense this program did nothing different.
  • Here's a few:

    • Give us your personal information and you can have lots of friends.
    • Our motto is "Don't be evil"
    • The government is actually more efficient than the private sector

ASCII a stupid question, you get an EBCDIC answer.

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