SEC Charges Eight Social Media Influencers with $100 Million Stock Manipulation Scheme
The Securities and Exchange Commission (SEC) has just announced that it will be filing charges against eight individuals in connection with a $100 million securities fraud scheme. In this scheme, the defendants manipulated exchange-traded stocks by using the social media platforms Twitter and Discord.
According to the SEC, seven of the defendants have been promoting themselves as successful traders on Twitter and in stock trading chatrooms on Discord since at least January 2020. They have also cultivated hundreds of thousands of followers during this time period.
It is alleged that these seven defendants bought specific stocks, and then they encouraged their large following on social media to buy those same selected stocks by posting price targets or indicating that they were buying, holding, or adding to their stock positions.
However, according to the allegations made in the complaint, when share prices and/or trading volumes rose in the promoted securities, the individuals routinely sold their shares without ever disclosing their intentions to dump the securities while they were promoting them. This is alleged to have occurred when the share prices rose and/or trading volumes increased.
“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 $100 million,” stated Joseph Sansone, Chief of the Market Abuse Unit of the SEC Enforcement Division.
“Our complaint states that the defendants used social media to amass a large following of novice investors.” “Today’s 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 the statement. “Today’s action also serves as a reminder that investors should be cautious about unasked-for advice.”
The following people have been charged with securities fraud:
- Perry Matlock from the great state of Texas.
- Mr. Zack Morris from Texas.
- Thomas Cooperman from California.
- Gary Deel from California.
- New Jersey’s Mitchell Hennessey.
- Stefan Hrvat from in Florida
- John Rybarczyk from Texas.
Daniel Knight (Twitter Handle @DipDeity), of Texas, is accused of aiding and abetting the alleged scheme in the complaint. This allegation is based on the fact that Knight co-hosted a podcast in which he promoted many of the other individuals as expert traders and provided them with a forum for their manipulative statements. In addition, Knight engaged in coordinated trading with the other defendants and routinely reaped financial benefits from the manipulation.
In its complaint, which was submitted to the United States District Court for the Southern District of Texas, the Securities and Exchange Commission (SEC) seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties against each defendant.
Additionally, the SEC seeks to bar Hrvatin from trading in penny stocks. A parallel action was brought forth by the Fraud Section of the Department of Justice and the United States Attorney’s Office for the Southern District of Texas, which resulted in the filing of criminal charges against all eight individuals.
Andrew Palid, David Scheffler, and Michele T. Perillo of the Market Abuse Unit (MAU) in the Boston Regional Office are in charge of the investigation that is currently being conducted by the Securities and Exchange Commission (SEC). They are receiving assistance from Darren Boerner of the MAU, Stuart Jackson, Kathryn Schumann-foster, and Marina Martynova of the Division of Risk and Economic Analysis (DERA), and Howard Kaplan of the Office of Investigative and Market Analytics.
Mark A. Gera, John Kachmor, Nitish Bahadur, and Raymond Tan in the Boston Regional Office were the ones who made the referral to the investigation from the Division of Examinations. This led to the investigation. David D’Addio and Amy Burkart, both of the Boston Regional Office, will be in charge of overseeing the litigation.
The Securities and Exchange Commission is grateful to the United States Department of Justice’s Criminal Fraud Section, the United States Attorney’s Office for the Southern District of Texas, the Federal Bureau of Investigation, and the Financial Industry Regulatory Authority for their assistance.
An Investor Alert on Social Media and Investment Fraud has been issued by the Securities and Exchange Commission’s Office of Investor Education and Advocacy. The website Investor.gov provides additional resources for investors to peruse, such as a list of red flags that may indicate investment fraud.
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