A federal grand jury in California has charged short seller Andrew Left with multiple counts of securities fraud for a $16 million stock market manipulation scheme.
The Department of Justice said in a statement on Friday that Left, who was a securities analyst, trader, and guest commentator on television channels including CNBC and Fox Business, is charged with one count of engaging in a securities fraud scheme, 17 counts of securities fraud, and one count of making false statements to federal investigators. As a short seller, Left would make money betting stocks would fall.
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The Justice Department said that Left conducted business under the name Citron Research, which had a website that published investment recommendations. He published research on companies ranging from Tesla and GameStop to Grand Canyon Education and Peloton.
If convicted, Left faces a maximum penalty of 25 years in prison on the securities fraud scheme count, 20 years in prison on each securities fraud count, and five years in prison on the false statements count.
According to the indictment, Left would comment on publicly traded companies and make recommendations on the shares. The commentary often included sensationalized headlines ("Investors Peddling Themselves into Frenzy") and exaggerated language to maximize the reaction it would get from the stock market. As alleged, Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money.
The indictment further alleged that before Citron would publish its commentary, Left would create long or short positions in a public company on which he was commenting in his trading accounts and prepared to quickly close those positions after Citron's publication and take profits on the short-term price movement caused by his commentary.
Separately, the Securities and Exchange Commission said that it is charging Left and Citron in what they said was a $20 million fraud scheme that used “bait and switch” tactics to mislead investors. The SEC’s complaint, filed in the United States District Court for the Central District of California, charges Left and Citron Capital with violating antifraud provisions of the federal securities laws.
“Andrew Left took advantage of his readers. He built their trust and induced them to trade on false pretenses so that he could quickly reverse direction and profit from the price moves following his reports,” Kate Zoladz, Director of the SEC’s Los Angeles Regional Office, said in a statement.
The complaint seeks disgorgement, prejudgment interest, and civil monetary penalties against Left and Citron and conduct-based injunctions, an officer-and-director bar, and a penny stock bar against Left.
Representatives at Citron Resarch didn't immediately respond to a request for comment. According to the complaints, Left has relocated to Boca Raton, Florida from Beverly Hills, California.
The latest charges were not the first time Left has been accused of misconduct. In 2016, a Hong Kong tribunal ruled that Andrew Left engaged in market misconduct by publishing false or misleading information about a Chinese property developer, Evergrande, in June 2012. But Evergrande, whose debt ballooned to exceed $300 billion, was unable to come to terms with its creditors and was ordered earlier this year to liquidate.