SEC Charges Idaho Residents with $12 Million Fraudulent Scheme Involving Stock Picks

The Securities and Exchange Commission announced charges and a court-ordered asset freeze against two Idaho residents, David Lee Stone and John Robson, for allegedly generating over $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 scheme, which began in November 2020, involved Stone using deceptive means to obtain pre-release access to stock picks from The Motley Fool, a subscription stock picking service. He would then share the picks with Robson, and they would purchase aggressive positions in the selected issuers, cashing out after The Motley Fool announced its picks. The SEC alleges that Stone made illicit profits of over $3.9 million, and Robson made nearly $3 million.

Key Takeaways:

• The SEC charged David Lee Stone and John Robson with violating the antifraud provisions of the federal securities laws, alleging they made illicit profits of over $12 million by deceptively obtaining stock pick information from a subscription service and trading on that information.
• The scheme, which began in November 2020, involved Stone using deceptive means to obtain pre-release access to stock picks from The Motley Fool and sharing them with Robson.
• The SEC alleges that Stone made illicit profits of over $3.9 million, and Robson made nearly $3 million.
• Two of Stone's family members and two of Robson's friends were named as relief defendants, with their brokerage accounts generating approximately $5 million by trading ahead of The Motley Fool stock picks.
• The SEC seeks permanent injunctions, disgorgement with prejudgment interest, and penalties against Stone and Robson, as well as disgorgement and prejudgment interest from the relief defendants.
• The SEC's investigation is ongoing, led by John Dwyer of the Denver Regional Office and supervised by Jason Burt and Gregory A. Kasper.
• The United States Attorney's Office for the Southern District of New York filed criminal charges against Stone in a parallel action.

Statistics:

• Over $12 million in illicit profits made by Stone and Robson through the scheme.
• $3.9 million in illicit profits made by Stone.
• Nearly $3 million in illicit profits made by Robson.
• Approximately $5 million generated by the brokerage accounts of two of Stone's family members and two of Robson's friends.
• The scheme involved at least two subscription stock picking services offered by The Motley Fool.

Sources:

• Securities and Exchange Commission 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).