Last updated on December 17th, 2022 at 03:53 am
one defendant allegedly said over a Discord voice chat.
Eight people have been charged by the Securities and Exchange Commission in connection with a $100 million securities fraud conspiracy in which they manipulated exchange-traded equities using the social media sites Twitter and Discord.
The SEC says that, starting at least in January 2020, seven of the defendants said they were experienced traders and got hundreds of thousands of followers on Twitter and in stock trading chat rooms on Discord.
These seven defendants are accused of buying particular stocks and encouraging their sizable social media following to purchase those chosen stocks by publishing price objectives or making it known that they were purchasing, holding onto, or increasing their stock positions.
But the complaint says that as the share prices and/or trading volumes of the securities they were promoting went up, the people kept selling their shares without telling anyone.
Joseph Sansone, who is in charge of the SEC’s Market Abuse Unit, said that the defendants used social media to get a large number of new investors to follow them.
Then, they took advantage of their followers by giving them false information all the time. This led to about $100 million in fraudulent profits.
“Today’s action shows what these alleged fraudsters really wanted to do, and it’s another warning to investors not to trust unsolicited advice they find online,” the statement said.
Seven people were accused of engaging in securities fraud:
Matlock, Perry Texas @PJ Matlock
Texas’ Edward Constantin tweets as “Mr. Zack Morris”
Californian author Thomas Cooperman @ohheytommy
Californian Gary Deel can be reached at @notoriousalerts.
New Jersey-based Mitchell Hennessey Twitter: @Hugh Henne
Stefan Hrvatin Florida @LadeBackk
Rybarczyk, John Texas @Ultra Calls
The complaint also says that Daniel Knight, who lives in Texas and uses the Twitter handle @DipDeity, helped and encouraged the alleged plot by, among other things, co-hosting a podcast in which he promoted a few of the other people as experienced traders and gave them a place to make false claims.
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Knight traded cooperatively with the other defendants and profited frequently from the manipulation.
In its complaint, which was sent to the U.S. District Court for the Southern District of Texas, the SEC asked for civil fines, disgorgement, prejudgment interest, permanent injunctions, and a ban on penny stocks for each defendant.
All eight defendants were also charged with crimes in a separate case brought by the Fraud Section of the Department of Justice and the U.S. Attorney’s Office for the Southern District of Texas.
The SEC’s investigation
is being led by the Market Abuse Unit (MAU) in the Boston Regional Office. They are assisted in this by Darren Boerner of the MAU; Stuart Jackson; Kathryn Schumann-Foster; Marina Martynova of the Division of Risk and Economic Analysis (DERA); and Howard Kaplan of the Office of Investigative and Market Analytics.
The investigation was the result of a referral made by Mark A. Gera, John Kachmor, Nitish Bahadur, and Raymond Tan in the Boston Regional Office to the Division of Examinations. David D’Addio and Amy Burkart of the Boston Regional Office will be in charge of the litigation.
The SEC has gotten help from the FBI, the Financial Industry Regulatory Authority, the U.S. Attorney’s Office for the Southern District of Texas, and the Criminal Fraud Section of the U.S. Department of Justice.
Social Media and Investment Fraud: An Investor Alert from the SEC’s Office of Investor Education and Advocacy. At Investor.gov, investors can get further details, such as fraud’s telltale indicators.