Eight social media influencers have been charged over a $100m (£81m) stock manipulation scheme.
The Securities and Exchange Commission, an arm of the US Government that enforces market law, accused the men of using the Twitter and Discord platforms to manipulate exchange-traded stocks.
According to the Commission, since at least January 2020, seven of the defendants promoted themselves as successful traders and cultivated hundreds of thousands of followers on Twitter and in stock trading chatrooms.
The complaint against them alleges that, for years, they promoted themselves as “trustworthy stock-picking gurus” to their “legions of followers” when in reality they are “seasoned” stock manipulators.
“The defendants used social media to amass a large following of novice investors and then took advantage of their followers by repeatedly feeding them a steady diet of misinformation, which resulted in fraudulent profits of approximately $100m,” said Joseph Sansone, chief of the Securities and Exchange Commission (SEC) Enforcement Division’s Market Abuse Unit.
They allegedly purchased certain stocks and then encouraged their followers to buy them too by posting price targets or indicating they were buying, holding, or adding to their positions.
However, the complaint alleges, when share prices and/or trading volumes rose in the promoted securities, the influencers sold their shares without ever disclosing their plans to dump them.
“Today’s [Wednesday] action exposes the true motivation of these alleged fraudsters and serves as another warning that investors should be wary of unsolicited advice they encounter online,” said Mr Sansone.
The following seven men charged with securities fraud and the Twitter handles they allegedly used are:
- Perry Matlock, of Texas, @PJ_Matlock
- Edward Constantin, of Texas, @MrZackMorris
- Thomas Cooperman, of California, @ohheytommy
- Gary Deel, of California, @notoriousalerts
- Mitchell Hennessey, of New Jersey, @Hugh_Henne
- Stefan Hrvatin, of Florida, @LadeBackk
- John Rybarczyk, of Texas, @Ultra_Calls
The SEC also charged Daniel Knight (Twitter handle @DipDeity), of Texas, with aiding and abetting the alleged scheme.
He is accused of co-hosting a podcast in which he promoted many of the others as expert traders giving them a forum for their manipulative statements.
Knight also traded in concert with the other defendants and regularly generated profits from the manipulation, the SEC alleges.
The SEC is seeking permanent injunctions, disgorgement, prejudgment interest, and civil penalties against all eight men, as well as a penny stock bar against Hrvatin.
Criminal charges against all eight have also been filed by the Department of Justice’s Fraud Section and the US Attorney’s Office for the Southern District of Texas.