Porter Stansberry Of Stansberry Research's $1.5 Million SEC Fine For Securities Fraud - Timothy Sykes

Porter Stansberry Of Stansberry Research’s $1.5 Million SEC Fine For Securities Fraud

UPDATE: Because we get a ton of emails from Stansberry victims, we’re offering everyone special pricing to show you not everyone in the stock picking business is evil. If you’ve been abused emotionally and financially, please contact me and we’ll tell you all about how we can help!

UPDATE: Despite my millions of dollars in career trading profits (see details), 197% gain in 2008, 141% gain in 2009 and 57% gain in 2010, I was wrong about Texas Pacific Land Trust (TPL), shorting in the 29 range and covering in the 30 range, protecting myself from a much bigger short squeeze that happened later…you can see my roughly $4k in losses/ trades HERE and HERE and HERE and know that Porter Stansberry & Co. continued their unethical writings as they claimed I was shorting all the way up to the eventual runup over 40…blatant lies from a guy busted by the SEC, see the article of my catching Porter in 4 blatant lies and also this other solid article I wrote about how these pumpers make bad information look good, luring in the weak and greedy.

A full research report on TPL is coming this afternoon…this is just a background post you need to know about how the newsletter that pumped TPL has actually been busted by the SEC for lying to its subscribers before, enjoy!

PennyStocking Silver subscribers and TIMalert subscribers understand my reasoning for my latest short in Texas Pacific Land Trust (TPL) at $29.65ish, in which I now have nearly $120,000 of my own money invested now, but many do not know the background of Porter Stansberry, the head of the “research outfit” that picked TPL and caused its 10% one day spike…who past is verrrrrrry checkered-no we’re not talking overly-checkered like those involved with managing and promoting carcasses like Spongetech Delivery Systems, Inc. (SPNG) and Positron Corporation (POSC) (ahhh NOBODY can compete with the Rooney family that does all sorts of “fun” things with Positron)…but as I wrote about Porter Stansberry’s $1.5 million SEC fine when I introduced him and his certainly unethical if debatably illegal marketing tactics in this post, this guy is a world-class scumbag….similar to FOX News’ Charles Payne who also many don’t know has been similarly fined by the SEC for ugllllly penny stock marketing practices (perhaps the SEC should revert back to go to punishments such as tar and feathering rather than making already-wealthy scumbags fork over small percentages of their ill-gotten gains?)

Anybody who subscribed to any of Port Stansberry’s dozens of newsletters through literally hundreds of websites can attest to that as not only does their propaganda rival Hitler, but more importantly their performance rivals that of the clown Jim Cramer, aka some of the worst performance in all of finance…which is why they and their subscribers don’t post their trades and share openly on Profit.ly.

But as you’ll read the entire SEC complaint again Porter Stansberry & Agora Inc. & Pirate Investor below, realize that Porter Stansberry is no clown…he is not entertaining, he is not popular, he is not on TV. Instead he and his many companies and newsletters and employees (rumored to pull in $30 million/year) are dangerous.

Hence why the odds are waaaaay on my side to short one of his company’s picks and as you’ll see tomorrow how poor/incompetent at researching they are. Especially when that faulty research has spiked a company’s valuation by roughly $25 million or 10% the very day they release such laughable “research”.

Do read the entire Porter Stansberry SEC complaint or read the nice summary regarding the $1.5 million fine & all the nasty stuff that the blatantly unethical Porter Stansberry did…as posted below…and remember he did to those who paid him–his own subscribers–I’d hate to see how he treates people who don’t pay him!

OffshoreAlert, October 11, 2007

U. S. JUDGE FINES AGORA SUBSIDIARY AND EDITOR $1.5 M FOR SECURITIES FRAUD

An investment newsletter’s publisher and its editor have been hit with $1.5 million in financial penalties after a U. S. federal judge determined they defrauded their own subscribers in a securities scam.

Judgment in favor of the Securities Exchange Commission and against Maryland-based Pirate Investor LLC, now called Stansberry & Associates Investment Research, LLC, and Frank Porter Stansberry was issued at the U. S. District Court for the District of Maryland on August 1, 2007 – 28 months after the completion of a bench trial. The penalty comprises disgorgement of $1.3 million in profits and interest from the fraudulent activity, for which Pirate Investor and Stansberry are jointly and severally liable, plus a fine of $120,000 against each defendant.

U. S. District Judge Marvin J. Garbis found in favor of a third defendant, Pirate Investor’s parent, Agora, Inc., determining that it could not be held liable for the fraudulent statements of its subsidiary simply “by virtue of its ownership and ability to control Pirate”. There was no evidence that Agora, as opposed to Pirate, directly made the false statements at issue, determined Judge Garbis.

The SEC had accused the defendants of fraud concerning a “Special Report” authored by Stansberry, using the pseudonym ‘Jay McDaniel’, about publicly-listed uranium enrichment services provider USEC, Inc. and a promotional “Super Insider Tip Email” offering the Special Report for sale that was distributed on May 14, 2002, after which Pirate Investor sold 1,217 reports for $1,000 each.

The promotional material offered purchasers of the report the opportunity to “double your money” by acting on “inside tips” that Stansberry had obtained from a “senior executive inside the company”, according to the SEC. However, the SEC alleged that the report, which included a claim that Government approval for a lucrative new pricing agreement involving USEC would be announced on May 22, was replete with lies and the judge agreed.

“The Super Insider Solicitation and the Special Report contain numerous statements that were untrue,” he commented. “Some of the untrue statements may not be actionable. [For example, the use of the pseudonym “Jay McDaniel” or even the predictive nature of some statements.] However, the essential fraudulent element – the misrepresentation that the purveyor of the Special Report had a particular inside source for the precise date on which the stock price would rise – is definitely actionable.”

Report purchasers were informed that USEC was due to sign a lucrative contract, that the deal would be announced on May 22, 2002, and that this would cause its share price to “skyrocket”, stated the judge. However, after the date came and went without any such announcement, “many individuals who purchased the USEC report” requested refunds from the defendants and “many investors posted negative sentiments” on the defendants’ own message boards, noted the judge. Pirate customer service representative Elyssa Yankelov testified that “Pirate had never had so many complaints about a report prior to the USEC Special Report”, noted the judge.

Even USEC, which was not involved in the fraud, received telephone calls from buyers of the report who “demanded to know” when the deal was coming and “were angry that USEC had not made the promised announcement”, stated the judge.

Pirate Investor’s promotional had a significant impact on USEC’s share price and the volume of shares traded, he observed. On May 13, 2002, the day before the Super Insider Solicitation, the trading volume of USEC’s stock was 49,900 shares, and the average volume of the previous 30 days was 127,080 shares. On May 21, 2002, “the day that the Super Insider Solicitation had identified for investors to purchase USEC stock”, the trading volume was “ten times larger than the 30-day average”. The judge added: “Defendants have presented no evidence that any other newsletter writer, journalist or investment advisor had pegged May 21 as an important buy day for USEC.”

He continued: “The gravity of the harm in this case is not limited to the amount of money each purchaser spent for the Special Report. Approximately 1,217 investors bought the Special Report with the expectation, as promised by the Super Insider Solicitation, that they would double their investment dollars if they just followed the “insider” information contained within the Special Report.

“At least one investor lost approximately 20 to 25% of his investment portfolio after purchasing USEC stock and options between May 13 and 22. That investor finally sold his stock, after May 22 came and went without the anticipated announcement, in August of 2002 when Stansberry indicated in a new special report to investors that USEC stock was no longer a good long-term investment. The investor lost about $28,000.

“Although the investor eventually received a refund of the $1,000 Special Report purchase price, that refund was not offered to him by Defendants. Rather, he learned that other purchasers of the Special Report had been offered refunds after reading about the SEC action against Defendants on the Internet. It was then that he contacted Pirate and requested and received a refund of the $1,000 purchase price.

“Another investor who purchased the USEC Report for $1,000 testified that he sold other investments and borrowed money on a credit card in order to purchase 7,500 shares of USEC stock with the expectation that he would double his money after May 22. That investor lost approximately $7,200 when he eventually sold the stock, two months after the approval of the new pricing agreement was supposed to have been announced. He was never offered a refund of the purchase price of the USEC. Although that investor tried on a number of occasions to get answers to specific questions about the status of USEC stock and the non-existent May 22 announcement, Stansberry merely responded that he could not give individualized investment advice.

“Investors certainly lost more than the $1,000 purchase price of the USEC Report. While Defendants reaped approximately $1 million in revenue from the sale of 1,217 copies of the Special Report, the losses to investors no doubt greatly exceeded that amount.”

When calculating the amount of the profits he should order Stansberry and Pirate to disgorge, Judge Garbis stated: “Pirate sold 1,217 copies of the Special Report at $1,000 per report, and reimbursed 215 purchasers of the Special Report, refunding a total of $215,000. Thus, Pirate’s net receipts for the sale were $1,002,000.Stansberry testified that he received a commission from Pirate for the Special Report sale in the amount of $200,400. Therefore, the profit “causally connected to the violation” was $200,400 for Stansberry and $801,600 for Pirate.”

The judge considered it “appropriate to hold Stansberry and Pirate jointly and severally liable for disgorgement of the entire amount”, noting Stansberry’s testimony that “he ran the ‘show’ and was the “person in charge” of Pirate.

“Stansberry and Pirate were intimately involved in perpetrating the fraud at issue. Stansberry drafted the Super Insider Solicitation using a Pirate author’s pseudonym, utilized Pirate’s mailing list and newsletter, had sales of the Special Report, had Pirate receive the proceeds and keep the majority for itself.

“Furthermore, Stansberry testified that he received a bonus that was a percentage of Pirate’s net income, and that in 2002, the year of this fraud, he “made substantially more.” He was unable to recall his specific bonus in 2002, estimating that it ranged from between $200,000 and $400,000. Stansberry profited handsomely from Pirate’s gain from the fraudulent scheme.”

In coming to the conclusion that Stansberry should receive the $120,000 maximum fine for an individual that he was allowed to give, the judge noted that Stansberry’s conduct “undoubtedly involved deliberate fraud” and “making statements that he knew to be false;”. Judge Garbis determined that Stansberry had “testified falsely at trial” and did not recognize his “financial culpability”.

The judge also entered an injunction prohibiting Stansberry and Pirate Investor from committing further securities fraud. “Defendants have not admitted the current fraudulent scheme,” stated the judge. “If Stansberry were to provide an assurance, that there would be no future violations, the Court would not find him particularly credible. The existence of an injunction against future fraudulent schemes of the type involved here will provide a needed measure of security against recidivism. The Court finds, after weighing the relevant factors, that there is ample evidence of a “reasonable and substantial likelihood” that Defendants will violate securities laws in the future, absent an injunction.”

Pirate Investor and Stansberry have announced their intention to appeal the judgment.

A cornerstone of their unsuccessful defense was that they were protected by the First Amendment of the U. S. Constitution, which protects free speech. In his judgment, Judge Garbis stated: “There is no doubt that each of the Defendants was engaged in the production and distribution of publications entitled to substantial First Amendment protection. However, as discussed herein, the instant case does not relate to such publications. Rather, the instant case relates to a fraud scheme whereby victims were induced to pay $1,000 each for a “sure thing” stock tip allegedly based upon “inside information” presented separately from Defendants’ regular publications.” He held that the comments were not “pure speech” but “commercial speech”, which entitled them to lesser First Amendment protection. Referring to case law, Judge Garbis stated that, n order to receive First Amendment protection, commercial speech “must be neither misleading nor related to unlawful activity” and, therefore, Stansberry and Pirate were not entitled to receive such protection.

Posted in Penny Stock Scandals, The P Team

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34 comments

Timothy Sykes

Hey Everyone,

As many of you already know I grew up in a middle class family and didn't have many luxuries. But through trading I was able to change my circumstances --not just for me -- but for my parents as well. I now want to help you and thousands of other people from all around the world achieve similar results!

Which is why I've launched my millionaire challenge. I’m extremely determined to create a millionaire trader out of one my students and hopefully it will be you.

So when you get a chance make sure you check it out.

PS: Don't forget to check out my free Penny Stock Guide, it will teach you everything you need to know about trading. :)

  1. Guest

    Come on Tim. Comparing Cramer to Porter Stansberry is ridiculous. Cramer compounded 24% after fees at his hedge fund. I don’t even like Cramer, but basing Cramer’s trading ability off of Investimonials and the Lightning Round, like Barron’s did, is insane.

  2. Pingback: How SEC-Busted Stansberry Research Just Pumped A Sleepy Oil Stock

  3. Sheldon

    Stansberry group of companies are a sham. Most of their letters, like Retirement Millionaire, Penny Stock, and Insider trades refuse to post results and overall perfromance of their reccos. I have been monitoring for over a year and I agree with the OP that shorting their reccos will make you more money than going long. Especially when their sheep subscribers pile in and spike the price. Shorting at that point has been very profitable.

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  5. Scott

    whatever dude… I’ve followed Stansberry for about 8 years now. You’re providing half the story and a bunch of half truths, just like you claim that he’s doing.

    They’ve had some stocks blow up, just like everyone does occasionally, but they’ve also had a lot of great ideas. They urge disciplined trading stops, as well, so no one who truly listens to them ever gets blown up in the market.
    I’m a long term Stansberry subscriber and happy to say so.

  6. Anonymous

    their track record sucks (they dont show it like i do), they have SEc fines, their emails always say something like “turn $10,000 into $1 million”–as someone who actually did turn $12,000 into $1.65 million in 4 years, their entire marketing approach is absolute shit and i intend on exposing them for years to come

  7. Scott

    I never said I approved of or enjoyed their marketing approach – it’s a lot of hype. I said I liked their research. I have seen the track records across dozens of their letters – each letter does indeed publish a track record each time it is released. Their track record does not suck. They do not generally focus on penny stocks, so comparing your track record to theirs is like comparing a stock to a bond.

  8. Anonymous

    penny stocks vs. large stocks hard matters when it comes to % wins and winning %…i will tell you right now their track record pales in comparison to mine and sveeral others newsletters. gimme some time, i’ll put together a whole presentation, your mind is just clouded by their marketing it seems

  9. Drnantz

    This guy has a major ad on Drudge Report. It’s 30 minutes in duration and convinces you the world is coming to an end.

  10. Pingback: Catching SEC-Busted Stansberry Research In 4 Blatant Lies & Why Porter Stansberry Is The Real Life Hyman Roth

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  12. bubble busting

    He does not tell you the gas tax on the countries in question are 2.70 to 3.50 per gallon and that tax pays for healthcare and retirement. He is scum at the lowest level……steering peoples fears into his wallet….

  13. jerky

    SEC fined him $1.5 million for previous schemes, his company suckered people out of a $1000 each investment packet or insider tips that were false. He’s obviously pissed at the government and this is his way to scare people right out of their money. How could anyone take this guy seriously?

  14. Fxstrider

    I am a full time Trader and think you are off base. Your vehemence and my own experience shows me Stansberry is more right than wrong.

  15. Anonymous

    their longterm track record sucks as we’ve been investigating all their picks…if u think theyre good, encourage them to post their stuff on http://profit.ly may the best newsletter win…and not get fined for absurd marketing

  16. Raywinn1

    I think Mr. Sykes needs medical attention. Why spend you time knocking someone else … just go out and do good deeds for your own good works … and your fat wallet. I have been taking investment ideas from Stansberry for only eight months and have done a lot better than the market. Just today I closed an oil put for a 66% profit from only about a week ago. We all have winners and losers.

  17. Dudensingb

    He wanted people to buy Iceland bonds that paid high income within a short time. Iceland went belly up in less than 5yrs. He also contacted another neighbor of mine in another town. What was he up too. Stealing, cheaping or scaming. He was looking for a quick million

  18. Guest

    Dear Tim, did you apply for a job at Stansberry many years ago and got knocked back? This is the only reason I can think of to explain you spending so much time discrediting them. Try to focus on improving your own performance, you may seem more respectable and credible yourself, instead of looking like a Chihuahua biting at heels. Your behavior resembles Syndrome in the movie “the Incredibles.” I am a second generation Stansberry reader (10 year +), and as someone with a little intelligence, I can say that it is really not that difficult for me to see beyond the marketing lingo and assess the true message and quality research in their articles, which have done very well for my family!

  19. Anonymous

    haha no i didn’t apply for a job, agora only takes copywriters who arent actual investors or traders and who don’t have superior track records like i do…thats why they NEVER show their track record…say what u want, i’m a 100% transparent self-made millionaire and i teach exactly how i do it…agora is a multi-million newsletter empire built on telling stories and whose performance sucks…sometimes the SEC doesn’t like their stories…deal with it, you’re welcome for my telling the truth, morons like u dont’ deserve it

  20. Ryan Laurent

    Why are Stansberry’s rants akin to “Hitler”?  Can you give some examples of what you mean by that?   They seem pretty pretty sensical to me – If you are a far left kook I can’t see why you don’t like Stansberry; otherwise what he says makes sense and much of what he has said in the past has come to pass; especially with regard to Obama and friends Bankrupting the country.  No one can be 100% accurate; we are only human.

  21. Skutch1963

    Mr Sykes,  I think there is a little truth in what everyone says, even people who are often scams are never 100 wrong in what they say.  However, we have seen times likes these repeat themselves over the years.  In 2000 I knew people rushing to buy houses and complaining about the prices, having seen housing prices do the same thing in the 80’s with the same result (interest rates went up, inflation  was high, housing prices topped out and some prices came down,  people walked away from mortgages etc) I knew it would do the same thing again.  Yes, interest rates probably will increase again and housing prices will probably either stabilize or come down a bit more, but I don’t think that is as bad as people think.  When interest rates rise, the banks give you higher rates on savings and when salaries have declined the only way for them to afford to buy a house with higher interest rates in lower prices.  More people in houses means more property taxes being paid.  As for what he says about the government being to “regulatory” to businesses, I personally think it is hogwash.  As the years have progressed, the difference between what the average worker makes and what the boss makes has increased exponentially.  I personally think greed at the top is what sends jobs overseas.  Yes, everyone is entitled to make money, however it’s irresponsible to pay workers less or not keep up with inflation so that a few may profit more.  One last thing, I know nothing about investing, stocks, etc…  I’m just an average person who has seen this happen before.  This is not to say we couldn’t be the next greece (I pray we aren’t), but that I have faith history will repeat itself again and we will survive because of it.  Thank you for letting me get my two cents in.

  22. forked

    How many recommendations by people who *sell* their advice in “newsletters” actually are decent long term investments? Is it not possible that these short term spikes are actually caused by the newsletter subscribers buying recommended stocks like lemmings? Hopefully the poor suckers have the good sense to divest after such a spike happens…meanwhile the “newsletter” publishers are making $ coming and going. I don’t doubt a few people who understand the system (essentially a giant ponzi scheme) & the various ways of exploiting its subtleties (not to mention those who don’t really understand it) are making actual, substantial monies (Mr. Stansberry & Mr. Sykes included – ever notice how every stock adviser seems to have cornered the market on the truth?) but I fail to see how any of this is actually helpful to the real, macro economy in the long term. It seems *responsibility* is a dirty word in the investment world. Everyone is really just out for themselves in this insidious game and it looks to me like the little fish are simply attempting to emulate the big fish, regardless of right & wrong. None of these shenanigans are helpful to the growth, stability & sustainability of the larger economy (in my opinion). Yes, I am jaded because every penny of my family’s (comparatively meager) wealth was lost by investment “professionals” way back when the internet bubble burst. Anyone remember that? HA! Unfortunately, I do…but I was not making the financial decisions & this was perpetuated against my (perhaps too) vehement objections. In the end, the top executives at that brokerage house siphoned all the monies out & even stopped paying its brokers. The company (known as Continental Broker-Dealer Corp.) closed its doors within a year after that particular bubble burst. I’m sure the $ went with the top executives back to Prudential, who provided the cash (not to mention, executive expertise) to start the company – I’m sure with the express purpose of making huge sums for the brokerage house by running extremely risky “strategies” for its clients, plus by making very frequent transactions. During the 5 years they had control of our assets, I later figured out that they made MORE than the total portfolio was worth (near the end, when everything was flying high) in margin interest alone – not even taking transaction fees into account. In the end, it was clients be damned : take the money and run. But I digress. What do I think to be wise? Invest only in what you know (by personal experience or research) & employ only those techniques which you well understand. All get rich quick schemes are false…they’re generally a blueprint for someone else to get rich quick on your ignorance. Nobody actually gives a sh*t about you…of that you can be sure.

  23. Mocombeg

    Obama did not did not bankrupt the country… we have to keep the facts correct… it was the Bush 10 billion dollar a month War that did that… with that said Mr. Obama and Friends Republicans included are the reason why we are going deeper and deeper into the hole!!!! I say vote all of their a…s…s..es out of their offices and put in some real Americans who love this country and will work to put us back on the right track!!!!

  24. Cgulledge

    I am curious how our increasing debt comes into your analysis?  Everything you mention points to inflation.  If American’s are already strapped, how will they pay for increases in credit card %, or afford the interest on a house if it is 10%.  You speack of savings, but most American’s have no real savings.  Their wages will not keep pace with inflation.  How much paper have we printed under Bush and Obama?  I remember in the 80’s there were commericals warning about he national debt.  Fast forward and we just continue to talk about it, but that is it.  If we have no crediability as a nation/currency, then game over.  No economy, no jobs, no taxes.  We nearly defaulted recently, we will eventually default.  It is inevitable.

  25. Cgrande

    Wrong, go back more than 2-decades.  I love these short-sighted arguments that only go back one president.  The last time I checked, Congress taxes and spends.  Bush and any president can be hamstrung by a Congress with a backbone.  Reagan ran up national debt according to Democrats, but the Dem. were in charge of Congress.  So what is their resonsibility?  This is an “American” problem, not a dem/ of rep. one, but we all all part of it and to blame for it.  Both parties have brought this country to the brink of collapse.  When the collapse occurs, I will care less who caused it.  Where is out resposibility in this as citizens?  Lots of talk, no action.  Lots of arguing, but no results.  Lots of pointing fingers, but no one stepping up.  Bush was a poor leader, got it.  Obama will tip us over the edge with his inflationary policy.  The man in brain dead when it comes to the economy.

  26. spoonytoons

    God Forbid a financial journalist to charge money for their research in an unorthodox way. All you do is attack Stansberry for his marketing strategy, which works, because you are confined to the norm, like the pawn that you are. God Forbid, a man, who had a lead and wanted to share it. His advice in the report on USEC would yielded investors a 150% return, but after he reported the information presented, the deal was delayed by one month, which may or may not thrown off his forecasting, but at the end of the day, how can he be fined by the SEC for providing information to the public he did not trade on himself or within his firm? He is sticking up to the fed for the things they do not want to tell the public they are doing with people’s hard earned tax money! I support Stansberry.

  27. Bahnu

    Anyone/everyone in this situation is using all kinds of marketing tactics to gain a share of the market !! What is new here ??? This is America, smart and maniupaltive people have the upper hand. I don’t understand your negative comments, besides they are appealing their case. There is win no situation as long as we continure to support and sustain a corrupt government which permits this kind of operations.  Need I say more!!!

  28. Anonymous

    manipulation will ALWAYS take place in the stock market, its about exposing it and more importantly, exposing the shitty results…Stansberry’s track record is TERRIBLE but people dont realize it since he’s not transparent like me

  29. Industry Insider

    Have some class and get your facts right. I like your material and Stansberry’s. Agora hires great independent analysts, not just copywriters. Your are lying on this point. Also Stansberry always shows his track records, again a lie. Agora is WAY larger then you acknowlege. Closer to the Billions… But if it makes you feel better trying to guess their size, whatever. Stansberrys perfomance is solid for equity picks in fact far better than most of the industry. If you study the facts of the SEC case, you wouild know the case had nothing to do with the acquations you have made incorrectly. You just made a bunch of stuff up. Get classy be infomed and stop hurting the rest of our industry. BTW I dont work for Stansberry but read everything they write. I read all your stuff too but will now reconsider.

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