The Securities and Exchange Commission has charged eight individuals with operating a $100 million securities fraud scheme, using social media platforms Twitter and Discord to manipulate exchange-traded stocks.
The US watchdog alleges hat seven of the defendants promoted themselves as successful traders and since January 2020 gained hundreds of thousands of followers on Twitter and in stock trading chatrooms on Discord. According the official announcement, the defendants bought certain stocks and then encouraged their followers to buy the same stocks with the use of price targets or indicating they were buying, holding, or adding to their stock positions.
However, SEC alleges that when the share prices increased in the promoted securities, the defendants sold their holdings without disclosed their plans to dump the securities. The seven individuals who participated in the scheme include Perry Matlock (@PJ_Matlock), Edward (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne), Stefan Hrvatin (@LadeBackk), and John Rybarczyk (@Ultra_Calls).
Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit, said:
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.
Additionally, the SEC alleges that the eight defendant, Daniel Knight (@DipDeity), helped the scheme by promoting on a podcast he co-hosted and presenting many of the other individuals as expert traders and providing them with a forum for their manipulative statements. The regulator also found that Knight traded along with the other defendants and regularly gained profits from the scheme.
The SEC is seeking permanent injunctions, disgorgement, prejudgment interest, and civil penalties against each defendant, as well as a penny stock bar against Hrvatin. Criminal charges have also been brought against the defendants in a parallel case.
