The brothers, for their part, claim that they did nothing wrong. In a sparse answer filed on Wednesday, June 27, they say the SEC has not shown any material misstatement or omission on their part. Although the answer is 10 pages long, it contains few other details. In response to most of the 63 paragraphs of the SEC’s complaint, the brothers simply deny any wrongdoing. They ask for a trial by jury.
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The complaint described how the brothers ran a newsletter in 2007 and 2008, when they were 16 years old, that relied on a “stock picking robot” that they called “Marl.” They said that Marl had been developed by Michael Cohen, a contractor who created a computer stock trading model for Goldman Sachs.
Marl, however, was a complete fiction, the SEC said. There was no technical analysis behind the stocks and there was nobody named Michael Cohen who had ever worked for Goldman Sachs. In fact, software that some subscribers received was programmed to select stock picks from a database that Thomas Hunter maintained, the complaint stated. Despite that, the newsletter attracted 75,000 subscribers in the U.S., who paid $1.2-million in fees.
Unbeknownst to those subscribers, the source of at least some of the stock picks was a separate service the brothers operated called equitypromoter.com that catered to stock promoters. With that service, the brothers would insert stocks into the Marl system for a fee. According to the complaint, the equitypromoter.com site advertised the ability to “rocket” the price of thinly traded penny stock issuers. In all, promoters paid $1.8-million to have Marl pick their stocks, the SEC claimed.
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