Eight social media influencers have been charged with trying to manipulate stocks through the use of their platforms, the Securities and Exchange Commission announced.
The SEC said the $100 million securities fraud scheme had been carried out since at least January 2020 by a group of defendants in Texas, California, New Jersey, Florida and Texas. The commission’s complaint states that seven of the defendants portrayed themselves as successful traders, amassing hundreds of thousands of followers on Twitter as well as in stock trading chat rooms on Discord.
The seven influencers allegedly bought certain exchange-traded stocks and encouraged their followers on social media to do the same. But they did not disclose to those investors that they planned to sell their securities once the share prices or the trading volumes rose, according to the SEC’s complaint. The defendants were allegedly able to make their profits by pumping up stock prices and selling the stocks when their value increased.
“As our complaint states, 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,” said Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit. “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.”
The seven influencers charged in the case were Perry Matlock, Edward Constantin and John Rybarczyk of Texas, Thomas Cooperman and Gary Deel of California, Mitchell Hennessey of New Jersey, and Stefan Hrvatin of Florida.
Also named in the complaint was Daniel Knight of Texas, who allegedly aided and abetted the alleged scheme in the podcast he co-hosted. The SEC said he promoted many of the other defendants as expert traders and gave them a forum for their alleged manipulation while also sharing in the profits.
In its complaint filed in federal court, the SEC is seeking permanent injunctions, disgorgement, prejudgment interest, and civil penalties against each defendant. Federal prosecutors also brought a parallel action with criminal charges that include conspiracy to commit securities fraud and, for several of the defendants, multiple counts of securities fraud. Each of the charges carries a maximum possible sentence of 25 years in prison.
Lewitas Hyman routinely represents investors harmed when financial professionals and their firms engaged in misconduct that caused their clients investment losses. Our team includes lawyers who have worked for large financial institutions, including Morgan Stanley and UBS Financial Services, and regulatory bodies such as the SEC. If you think your financial professional or firm engaged in misconduct that caused you investment losses, contact Lewitas Hyman At (888) 655-6002or through our online contact form for a no-cost evaluation of your matter.