The Securities and Exchange Commission (SEC) has filed a suit against British twin brothers alleging a cunning variation on the classic ‘pump and dump’ stock fraud that used the prowess of a non-existent computer program to con over $3 million from eager investors.

Extraordinarily, the pair, Thomas and Alexander Hunter from seaside town Whitley Bay near Newcastle, are said to have set up the fraud in 2007 when they were only 16 years old, not even young enough to vote or legally drink alcohol.

According to a lengthy SEC charge filed at the Southern District of New York, the teens, now 20, accepted fees from penny stock promoters for specific companies which they then recommended to investors through three newsletters, Doublingstocks.com, daytradingrobot.com and the later equitypromoter.com.

To make the recommendations sound convincing, the pair claimed to have used a sophisticated ‘stock-picking robot’ with deep analytic powers called ‘Marl’ that turned out not to exist.

Needless to say, the teens also allegedly lied about their ages, work experience, company setup, and even offered a home version of the Marl software as an inducement.

It wasn’t quite classic ‘pump and dump’ because at first the con did not rely on recommending stocks that were then sold at a profit on the back of bogus demand, but that was what made it clever. The profits came from recommendations and subs.

“My name is Tom Hunter. I'm a 23 year-old stock trader. I have been trading for 7 years and operate multiple penny stock websites. These websites are extremely popular attracting many thousands of visitors each day,” read a statement on the ‘about us’ section of one newsletter cited by the SEC in its charge sheet.

Enough investors believed them – 75,000 according to the SEC - to generate $1.2 million (£746,000) in subscriptions to the newsletters between April 2007 and July 2009 when the UK authorities finally froze the company bank account.  

Breaking with their modus operandi, the teens also allegedly made money on at least one occasion by buying and then quickly dumping one of the stocks they duped clients into buying as well as accepting $1,856 million from promoters.

If the charges stick, the affair could become the UK’s biggest Internet stock fraud, another tale of gullible, stock-hungry investors being conned by the apparent power of instant information.

The case has some odd elements beyond the unusual youth of the accused. The pair used their real names and set up a company that the UK authorities no trouble in tracing when they became suspicious of its activities.

They are also claimed to have moved their subscription bank account to Panama in a naïve and doomed attempt to avoid losing revenue after the UK account was discovered by the authorities.

One of the pair, Alexander Hunter, was reportedly given a suspended sentence by Newcastle Crown Court in November 2011 for unauthorised stock trading and ordered to repay $1 million taken from investors.