My cousin [we'll call him Chuck] has gotten involved with an investment "tutor" [we'll call him Tim] that has "hired" Chuck to make investments for Tim. From what I understand, Tim allows Chuck to invest Tim's money in what amounts to day-trading. Chuck currently has zero exposure of his own money in the market, and is making trades with Tim's money. Tim pays Chuck 30% of the profits on investments (I don't know if this is daily, monthly, yearly, or upon sale of an asset, but only that my cousin said he makes 30% of the profit).
Tim emails Chuck stock picks, which Chuck acts on e.g. Tim says "Buy XYZ", Chuck buys XYZ. Tim says "Sell XYZ", Chuck sells. Chuck is also free to make other transactions as he sees fit.
Chuck is a university student in the United States. He has said there are a group of others working for Tim, doing the same thing. Independently, this is the second time I've heard about a situation like this, where the other "trainee" has recently completed high school in the United States.
I do not understand how this could possibly work. I would not put my money on the line for some kid who just graduated high school. This can't be for real. My mind screams SCAM, but I can't for the life of me figure out how Tim will cash in on Chuck and his friends.
- Does Tim want to lose money on particular transactions?
- Is he trying to make it look like there is a large groundswell of support (or lack thereof) for a particular stock?
- Why can't he just have bots do this (bots that don't take 30% of the profit?!!?!?).
- Could it be a long con where my Chuck eventually is convinced to put his own money in and loses it?
- Did Chuck (and this other guy I heard of) just find a very wealthy benefactor that is trying to help them learn about markets? (Although this is what I'm hoping for, it doesn't seem very likely.)
What is going on here?
I've learned a little more from my cousin. Chuck is not exposed to any risk financially and nothing is in his name. The company opened an account and gave him a login to trade with. He also does not trade stocks. It's only Forex and futures. Chuck has met the founders in real life, they have an actual office location, he had to go through 12 intensive weeks of training before being allowed to trade, and can direct his profit into his personal bank account at any time. The other one (the high school graduate) seems far more shady. So it seems we might be dealing with two different classes of things.