Andrew Fassari charged with ‘pump and dump’ on twitter

Rick Steves

Mr. Fassari tweeted about 120 times to his thousands of followers that ARCS was reviving its operations, expanding its business, and being backed by “huge” investors, all false or misleading statements.

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The Securities and Exchange Commission has charged Andrew L. Fassari with fraud and mandated an asset freeze and other emergency relief against the Irvine, California-based trader.

Mr. Fassari used social media to spread false information about a defunct company, while secretly profiting by selling his own holdings of the company’s stock.

Equipped with his Twitter handle @OCMillionaire, he made false statements about Arcis Resources Corporation (ARCS) during December 2020 shortly after purchasing over 41 million shares of ARCS shares.

Mr. Fassari tweeted about 120 times to his thousands of followers that ARCS was reviving its operations, expanding its business, and being backed by “huge” investors, all false or misleading statements.

“$ARCS 380,000 indoor cultivation 1 Million+ sq ft processing. WEEEEEEEEE This CEO has big plans for us” and “a ton of news coming and backed by huge investors for its #cannabis operation[.]”, where a few of his tweets.

His pump and dump scheme succeeded, as over the next several days, ARCS’s share price skyrocketed, ultimately increasing over 4,000%. The SEC alleges Mr. Fassari sold all his shares in ARCS for profits of over $929,000 in mid-December.

The SEC alleges that Fassari continued to tweet about other stocks as recently as January and February 2021.

Melissa R. Hodgman, Acting Director of the SEC’s Division of Enforcement, said: “We allege that Fassari profited by using social media to deceive investors. The SEC is committed to protecting investors by proactively monitoring suspicious trading activity tied to social media, and by charging those who use social media to violate the federal securities laws.”

The SEC’s complaint charges Fassari with violating the antifraud provisions of the federal securities laws and seeks a permanent injunction, disgorgement, prejudgment interest, and a civil penalty from Fassari.

In addition, on March 2, 2021, the SEC issued an order temporarily suspending trading in the securities of ARCS.

As social media trading picked up ever since the r/WallStreetBets mania in late January 2021, the SEC is likely to have a busy year policing the internet, looking for pump and dump schemes like these, and bringing them to justice.

The US financial watchdog has recently suspended 22 securities that were being promoted on social media with the only purpose of inflating the price.

Nick Morgan, a former SEC senior trial counsel who is now a litigation partner with law firm Paul Hastings, believes the chances of prosecutions are slim, though not unexpected. Mr. Morgan notes that the SEC did not suspend trading of GameStop even when the stock was going to the moon, fueled mostly by manic enthusiasm on online message boards. That was not the case with another recent run-up of a company called SpectraScience.

“The SEC has shown it is capable of suspending trading of a stock being touted on social media when there is evidence of violations of the federal securities laws,” he says. “In suspending trading of SepctraScience, the SEC cited ‘since late January 2021, certain social media accounts may be engaged in a coordinated attempt to artificially influence SCIE’s share price.’ We have seen no such allegation by the SEC about GameStop.”

 

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