SEC Gets Asset Freeze in Regards to Allegations of Motley Fool Stock Pick Frontrunning Ploy

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The Securities and Exchange Commission (SEC) has announced charges and a court-ordered asset freeze against two individuals who allegedly generated over $12 million by engaging in a ploy to “deceptively obtain stock pick information” from Motley Fool subscription services before it was disseminated to its subscribers.

According to the complaint, David Lee Stone and John D. Robson were able to uncover Motley Fool recommendations prior to the publish date and then trade on that information. The SEC states that since at least November 2020, the plan generated more than $12 million in profits trading on approximately 60 stock recommendations.

The SEC did not specify how, exactly, the information was accessed in advance of publication.

To quote the SEC complaint:

“Beginning in January 2021, David Stone began sharing those picks with Robson, by email, typically a day or two prior to their release. Prior to Motley Fool’s announcement of its picks, David Stone and Robson purchased aggressive positions in the selected issuer’s securities, including certain types of options contracts that were profitable only if the stock price increased within a week. The prices of the stocks would typically rise immediately after Motley Fool announced the pick. David Stone and Robson would then cash out of their positions, often within minutes after the Motley Fool announcement. Since January 2021, when Robson joined the scheme, David Stone and Robson traded ahead of the Motley Fool’s Thursday announcements nearly every week. David Stone has made illicit profits of more than $3.9 million trading in this fashion, and Robson has made illicit profits of more than $3 million.”

Relief defendants were also cited in the complaint.

The SEC states that picks often saw their stock price rise 3- 5%, or more, on the day the selection was announced.

The SEC’s investigation is ongoing.