SEC charges 8 Twitter influencers for $100 million ‘pump and dump’ scheme

Rick Steves

“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. 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 Securities and Exchange Commission has charged eight individuals in a $100 million securities fraud scheme on Twitter and Discord to manipulate exchange-traded stocks.

Since at least January 2020, seven of the defendants – Perry Matlock, Edward Constantin, Thomas Cooperman, Gary Deel, Mitchell Hennessey, Stefan Hrvatin, and John Rybarcyzk – allegedly promoted themselves as successful traders and cultivated hundreds of thousands of followers on Twitter and in stock trading chatrooms on Discord.

They encouraged audience to buy and hold, while they dumped the stocks

The SEC claims they purchased certain stocks and then encouraged their substantial social media following to buy those selected stocks by posting price targets or indicating they were buying, holding, or adding to their stock positions. When share prices and/or trading volumes rose in the promoted securities, the individuals regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them – a typical ‘pump and dump’ scheme.

Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit, commented: “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. 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.”

Defendant number 8, Daniel Knight, was charged with aiding and abetting the alleged scheme by co-hosting a podcast in which he promoted many of the other individuals as expert traders and provided them with a forum for their manipulative statements. Knight also traded in concert with the other defendants and regularly generated profits from the manipulation.

SEC charged $58 million pump-and-dump scheme in March

Earlier this year, the SEC charged five individuals for allegedly operating a call center in Medellin, Colombia, where they used high-pressure sales tactics and false and misleading statements to convince retail investors to buy stocks of small companies trading in the U.S. markets, also konwn as penny stocks.

The SEC announced charges against U.S. citizen Chester Alvarez, Canadian citizens Francis Biller, Raymond Dove, and Troy Gran-Brooks, and Dutch citizen Justin Plaizier. The agency stated defendants were paid approximately $10 million for promoting thinly traded stocks, which they misled investors to believe had high prospects for success.

The charged individuals set up as phony investment management firms, with fake names, websites, and phone numbers, according to the financial watchdog, which added that the defendants orchestrated a pump-and-dump scheme and made false and misleading statements when they promoted the stock of at least 18 issuers and that they generated more than $58 million in trading from this scheme.

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