Famed short seller Andrew Left was charged with fraud on Friday. Federal prosecutors allege that Left manipulated stock prices for his own financial benefit.
What Happened: Left, the founder of Citron Research, is accused of using his influence to manipulate stock prices in his favor, according to a report by The Wall Street Journal. The charges imply that Left would publicize his bets, set ambitious price targets and then quickly close his positions once his statements had affected the market.
The indictment asserts that Left’s appearances on cable news networks and his social media posts amplified the effects of his reports, leading others to follow his investment moves. “He used his platform as a securities commentator to manipulate the markets and enrich himself in the process,” said Los Angeles U.S. Attorney Martin Estrada.
Benzinga requested a comment from Left but has not received a response at the time of publication.
Left, based in Boca Raton, is facing criminal charges accusing him of securities fraud and making false statements to federal investigators. The indictment said he manipulated the prices of at least 15 stocks over a five-year period, resulting in illegal profits amounting to $16 million.
Prosecutors accuse Left of concealing his ties to hedge funds that were given early access to his research. In some instances, he is alleged to have presented their trading ideas as his own. If found guilty, Left could face up to 20 years in prison for each of the 17 securities fraud counts, 25 years for another securities fraud charge, and five years for one count of lying to investigators, according to WSJ.
Additionally, the Securities and Exchange Commission has filed a civil securities fraud lawsuit against Left and Citron, accusing them of “engaging in a $20 million multi-year scheme to defraud followers by publishing false and misleading statements regarding his supposed stock trading recommendations.”
"Andrew Left took advantage of his readers. 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," said Kate Zoladz, director of the SEC's Los Angeles Regional Office.
The SEC's complaint alleges that Left used his Citron Research website and social media platforms to publicly recommend stock positions that he quickly reversed for profit. The complaint further alleges that Left falsely represented Citron Research as an independent outlet and hid compensation arrangements with hedge funds.
Why It Matters: This indictment marks a significant turn of events for Left, who has been a prominent figure in the world of short selling. Left’s firm, Citron Research, has been known for its controversial reports on various companies, often leading to significant stock price movements.
Earlier this month, Citron Research questioned Keith Gill‘s, also known as Roaring Kitty, $200-million investment in Chewy Inc. CHWY, suggesting that it may not be Gill’s own money. This came after Left revealed that he had a small short position in GameStop Corp. GME as Gill neared a YouTube return.
The Last Word: Left’s indictment also brings attention to the future of short selling and its potential impact on the markets. Short sellers play an important role in identifying overpriced shares and uncovering fraud. Cases like those announced Friday could result in heightened scrutiny and possible regulation within the industry.
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This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image created using artificial intelligence via Midjourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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