SEC Obtains Asset Freeze Against Idaho Residents in Trading Scheme
Litigation Release No. 25381 / May 4, 2022
Securities and Exchange Commission v. David Lee Stone and John Robson, et al., No. 1:22-cv-03553 (S.D.N.Y. filed May 3, 2022)
The Securities and Exchange Commission today announced charges and a court-ordered asset freeze against two Idaho residents who allegedly generated more than $12 million by engaging in a fraudulent scheme to deceptively obtain stock pick information from a subscription service and trade on that information before it was disseminated to subscribers.
The SEC's complaint, filed in federal court in New York, alleges that since at least November 2020, David Lee Stone has used deceptive means to obtain pre-release access to stock picks by at least two subscription stock picking services offered by The Motley Fool. According to the complaint, beginning in January 2021, Stone began sharing those picks with his friend John Robson, typically a day or two prior to their release. The SEC alleges that Stone and Robson then purchased aggressive positions in the securities of the selected issuers, the prices of the issuers' stocks would typically rise after The Motley Fool announced its picks, and Stone and Robson would then cash out of their positions, often within minutes after The Motley Fool announcement. The SEC contends that Stone has made illicit profits of more than $3.9 million, and Robson has made illicit profits of nearly $3 million. The SEC's complaint names as relief defendants two of Stone's family members and two of Robson's friends whose brokerage accounts placed similar trades and generated approximately $5 million by trading ahead of The Motley Fool stock picks.
The complaint charges Stone and Robson with violating the antifraud provisions of the federal securities laws. The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, and penalties against Stone and Robson, and is seeking disgorgement and prejudgment interest from the relief defendants. In a parallel action, the United States Attorney's Office for the Southern District of New York filed criminal charges against Stone.
The SEC's investigation, which is ongoing, is being conducted by John Dwyer of the Denver Regional Office and Danielle Voorhees, Frank Goldman, and Patrick McCluskey of the Market Abuse Unit. It is being supervised by Jason Burt of the Denver Regional Office and Joseph Sansone of the Market Abuse Unit. The litigation will be led by Nicholas P. Heinke and supervised by Gregory A. Kasper. The SEC appreciates the assistance of the United States Attorney's Office for the Southern District of New York and the Federal Bureau of Investigation.