CNBC probes `unusual trading' in game for cash prizes

May 31, 2007|By Walter Hamilton | Walter Hamilton,Los Angeles Times

NEW YORK -- Even when it's play money, people just can't help themselves. They cheat.

It happened to McDonald's four years ago in its "Who Wants to Be A Millionaire" promotion, and to Taco Bell in its "Wheels, Reels and Meals" sweepstakes. Contestants cheated, swindled tens of thousands of dollars and gave companies angling for good publicity black eyes instead.

Now it seems to be CNBC's turn. The financial-news cable channel said yesterday that it was investigating claims that people playing its online " Million Dollar Portfolio Challenge" may have engaged in "unusual trading."

The idea behind the game - besides publicity - was to teach contestants how to trade stocks, not how to be at the center of Wall Street's next financial scandal. While stock picks were made with play money, the $1 million prize will be the real thing.

"There are always going to be cheaters. You can try your best to make it fair for everyone but sometimes a few people are going to try to find ways around it," said Timothy Sykes, a hedge fund manager and blogger who offered players advice during a contest segment that ran regularly on CNBC. (The show had a decidedly light air. In one episode, according to a video clip posted on his Web site, three female models helped Sykes by holding up signs of stock charts. "Suddenly, I feel woefully overdressed," CNBC's female host said as Sykes introduced them.)

Several contestants complained that trades made by some of the 20 finalists violated contest rules, CNBC said in a statement.

CNBC didn't disclose the alleged improprieties. In rules posted on its Web site, CNBC said participants had to abide by securities laws just as if they were really trading stocks and that it "reserves the right to terminate contest participation by any participants suspected of cheating, attempting to exploit the contest or other inappropriate behavior."

About 375,000 people entered the contest, creating more than 1.5 million mock portfolios of stocks that they bought with "CNBC Bucks."

Ten weekly winners each received $10,000. Weekly winners through May 14, along with 10 other contestants with the highest cumulative portfolio returns, squared off for a two-week final that ended Friday.

The cable channel said it still hoped to announce a winner by July 8 but added, "It is more important to ensure the individual awarded the grand prize is in compliance with the rules."

Among the finalists, according to a CNBC blog, are an investment manager with an MBA from Stanford University, a radiology resident from Detroit and a retired chemical engineer from Bolingbrook, Ill.

The leader going into the final day, according to the site, was Nancy Beaumont, a counseling director at Touro University in Vallejo, Calif. She couldn't be reached for comment.

In a coincidence of timing, CNBC said yesterday that it would air a six-episode series beginning next month entitled "American Greed: Scams, Scoundrels and Scandals."

"People will do anything for money," CNBC said in the announcement.

Walter Hamilton writes for the Los Angeles Times.

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