US prosecutors charge famed short seller Andrew Left with fraud
SEC and DOJ charge famed short seller in $16M stock manipulation scheme
Federal prosecutors on Friday charged prominent short seller Andrew Left with fraud, accusing him of using his vast following to manipulate the stock market and illegally profit to net at least $16 million.
The Securities and Exchange Commission (SEC) also filed charges against Left and his firm, Citron Capital, accusing them of "engaging in a $20 million multiyear scheme to defraud followers by publishing false and misleading statements regarding his supposed stock trading recommendations."
Authorities alleged that Left used his Citron Research website and social media platforms to recommend taking long or short positions in 23 companies, telling followers the positions were consistent with his own. Following his recommendation, the price of target stocks moved more than 12% on average, according to the complaint.
Once he issued the recommendation and the stock moved, Left and Citron Capital quickly reversed positions to capitalize on the change, the SEC said.
Andrew Left, the founder of Citron Research, speaks during the Reuters Global Investment 2019 Outlook Summit in New York on Nov. 12, 2018. (Reuters/Brendan McDermid / Reuters)
"Andrew Left took advantage of his readers," said Kate Zoladz, director of the SEC's Los Angeles regional office. "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."
Left, 54, declined to comment on the charges.
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For more than a decade, Left has been one of the most prominent "short activists," who bet against public companies on the basis that they were overvalued or engaging in fraud. He has published research on companies including GameStop, Peloton, Tesla and China's now-bankrupt Evergrande.
| Ticker | Security | Last | Change | Change % |
|---|---|---|---|---|
| GME | GAMESTOP CORP. | 27.93 | +0.10 | +0.36% |
| TSLA | TESLA INC. | 352.56 | +12.92 | +3.80% |
| PTON | PELOTON INTERACTIVE INC. | 9.54 | +0.48 | +5.30% |
Andrew Left, owner and founder of Citron Research, stands for a photograph after a television interview in Los Angeles on Oct. 22, 2015. (Patrick T. Fallon/Bloomberg via Getty Images / Getty Images)
For years, criminal prosecutors in Washington and Los Angeles and investigators for the SEC have been probing short sellers over potential market manipulation.
"To maintain the false pretense that Citron’s recommendations and positions were sincerely held, defendant Left made false and misleading representations and half-truths about his economic incentives, conviction in Citron’s analyses, and valuations of Targeted Securities," the Department of Justice said.
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Left is expected to be arraigned in the coming weeks in U.S. District Court in downtown Los Angeles.
If convicted, he 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, the DOJ said.
Reuters contributed to this report.