Andrew Left, Founder and CEO of Citron Research
Adam Jeffery |
Federal prosecutors have filed securities fraud charges against activist short seller and analyst Andrew Left, accusing him of using his public platform to illegally make a profit of at least $16 million by manipulating stock market events contrary to the positions he publicly advocated from 2018 to 2023.
Left, 54, and his hedge fund Citron Capital were also charged with fraud by the U.S. Securities and Exchange Commission in a related civil case.
In that civil suit filed in federal court in Los Angeles, Citron, who lives in Florida and frequently appears as a guest commentator on CNBC and other business news channels, was accused of “engaging in a $20 million, multi-year scheme to defraud his followers by publishing false and misleading statements regarding his purported stock trading recommendations.”
The lawsuit accuses 23 companies of fraudulent behavior in at least 26 individual cases.
“Linke boasted to colleagues that some of these statements [he made] were particularly effective in getting retail investors to act on his recommendations, and said it was like ‘Candy from a baby,'” the SEC alleged in that complaint.
Among the companies identified in the indictment as those with which Left allegedly traded in a manner contrary to his public stance on their stock prices were NVIDIA, Teslathe social media company X, formerly known as Twitter, Meta, Year, More than meat, American Airlines, PalantirXL fleet, Invite, General ElectricsNamaste Technologies and India Globalization Capital.
The indictment states, among other things, that “Left coordinated with hedge funds to distribute brief reports and information to be posted on Twitter. He coordinated with hedge funds on the timing of the publication and enabled the hedge funds to trade in the securities in question before the reports were distributed.”
“In exchange for communicating his planned announcements to the hedge funds prior to public disclosure, the hedge funds paid defendant Left a portion of their trading profits,” the indictment states.
Download the indictment.
Left, who lives in Boca Raton, is expected to be arraigned on the 19 charges in federal court in Los Angeles in the coming weeks, the U.S. Attorney's Office in Los Angeles said.
He declined to comment on the charges and the SEC's complaint.
“Mr. Left's presence on financial television networks and his substantial online following provided him with a credible platform to allegedly conceal his intentions and manipulate investors for his personal gain,” Akil Davis, assistant director in charge of the FBI's Los Angeles field office, said in a statement.
The indictment alleges that Left used Citron's online platform to comment on publicly traded companies and claim that their stocks were being mispriced by the market, either too high or too low.
“Left's recommendations often included an explicit or implicit representation of Citron's trading position and a 'target price' that defendant Left represented as his own view of the true value of the target security,” the indictment states.
“Left knew that his recommendations influenced investors' buying and selling decisions, thereby giving him the ability to manipulate the price of a targeted security,” the indictment states.
“By using Citron's Twitter account to create 'catalysts' – events that can move stock prices – defendant Left benefited from his foreknowledge that he was about to trigger such movements in the market.”
After using his influence to manipulate the price of a stock, Left “closed his positions to capitalize on the temporary price movement caused by his public statements,” the indictment states.
The indictment and complaint with the SEC provide specific examples of Left's alleged manipulation and exploitation of his contacts with business media outlets such as CNBC.
The SEC complaint states that Left and Citron Capital had a short position in Beyond Meat in May 2019, meaning they would profit from a falling stock price.
Left's other company, Citron Research, posted a negative tweet about Beyond Meat on May 17, 2019, advising readers to sell the stock and setting a price target of $65 per share—at a time when the stock was trading at about $87 per share.
“$BYND has gone beyond stupid” and “We expect $BYND to go back to $65 after earnings,” the tweet said. “Despite his negative statements toward the market, just 10 days earlier, Left had told a colleague that he believed BYND's price would go up, saying, 'I think BYND goes to 100,'” the SEC said in its complaint.
Within seven minutes of the tweet, Left exited most of his short positions in Beyond Meat and Citron Research “fully covered its short positions within 12 minutes of the tweet,” the complaint states.
“Later that same day, in advance of an article CNBC was planning to publish, a reporter emailed Left asking if he still had a trading position in BYND. In response, Left stated he had 'shorted some today,'” the complaint states.
“This statement was materially false and misleading because Left had exited the majority of its short positions and Citron Capital had already sold all of its short positions,” the lawsuit states. “Six minutes after this email exchange, Citron entered into additional short positions in BYND prior to the publication of the CNBC article.”
“Within an hour, CNBC published an article titled 'Short Seller Says Beyond Meat Hype Is 'Beyond Stupid,' Bets Against Stock,'” the complaint states. “After the article was published, Citron exited this additional short exposure.”
Left, who previously lived in Beverly Hills, California, is charged with participating in a securities fraud scheme, 17 counts of securities fraud and one count of making false statements to federal investigators.
If convicted, he would face a maximum sentence of 25 years in prison for securities fraud alone.
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