A pair of British twins who as teenagers claimed their stock-picking robot could unearth penny stocks ready to soar were sued on Friday by the U.S. Securities and Exchange Commission, which called the robot fake and the twins' fraud real.
The SEC said Alexander John Hunter and Thomas Edward Hunter, who ran the now defunct Global Marketing Corp, defrauded more than 75,000 investors who paid more than $1.2-million (U.S.) to learn about the picks by the robot, dubbed "Marl."
According to the regulator, the brothers hatched the scheme in 2007, when they were 16. They are now 20.
Eric Bruce, a lawyer for the Hunters, did not immediately respond to requests for comment.
The Hunters were accused of creating the websites Doublingstocks.com and Daytradingrobot.com to tout the robot, which was supposedly created by a former Goldman Sachs Group Inc. trading algorithm programmer and his partner.
Said to be named for its inventors, Marl supposedly could rapidly scour the over-the-counter market for cheap stocks on the verge of an upswing, and had a track record of selecting stocks whose prices then rose 200 per cent to 400 per cent.
The SEC said the Hunters collected the $1.2-million, mainly from U.S. investors, by selling $47 newsletters touting Marl's picks, and also sold a $97 "home version" of the Marl software.
In reality, the SEC said the scheme had another purpose: to tout stocks that the twins were paid more than $1.86-million to promote, using the website Equitypromoter.com.
Subscribers were not told of the conflicting relationship between the businesses, and the supposed Goldman programmer never worked in that capacity for that bank, the SEC said.
"The Hunters used the anonymity of the Internet and the promise of easy riches to prey on investors," Thomas Sporkin, chief of the SEC office of market intelligence, said in a press statement.
In its complaint filed in Manhattan federal court, the SEC is seeking to force the Hunters to give up illegal profit, pay civil fines, and agree to a ban on future fraud.