The SEC has just filed charges against two brothers in England alleging that they scammed 75,000 people through a scheme in which they touted a penny stock picking robot that they had developed that could identify stocks about to double in value. The two twin brothers, Alexander John Hunter and Thomas Edward Hunter began the scam in 2007 when they were only sixteen years old. The stock picking robot was a scam, but people still paid subscription fees to their newsletter. Meanwhile, they also sold their services to stock promoters claiming that they could send their stock prices soaring through their newsletters. Of course, the public was unaware that the twins were using a scam called “pump and dump” by which they tout a stock and temporarily drive up the price while they then sell the stock at the artificially established high price before the stock falls back to its true value leaving the people taking the investment advice with large losses.
As always, if it sounds too good to be true, it usually is. Always check out the qualifications of any investment advisor from whom you take advice. Make sure that you are dealing with someone reputable. Check with your state’s securities regulator or the Financial Industry Regulatory Authority which maintains a BrokerCheck website. Also make sure that any investment advisor you use is a member of the Securities Investor Protection Corporation (SIPC).