Since at least January 2020, influencers have allegedly been involved in a pump-and-dump operation. The SEC have charged the influencers in $100 million fraud.
Federal prosecutors and the Securities and Exchange Commission indicted eight social-media influencers in connection with a purported stock-manipulation scheme in which they exploited their platforms to manipulate stock prices and earn more than $100 million illegally.
Both the criminal and civil complaints (read below), filed in the United States District Court for the Southern District of Texas, accused these influencers of trying to encourage their followers online to buy stocks they had purchased without disclosing their intention to sell them after share prices or trading volumes rose. The SEC also charged an eighth individual with aiding and abetting the scheme.
According to the Justice Department, a federal grand jury indicted each of the eight individuals earlier this month on at least one count of conspiring to commit securities fraud in a $114 million scam. Seven of them are accused of engaging in securities fraud, including two who are facing five counts.
Federal prosecutors and the SEC indicted Perry Matlock, alias “PJ Matlock,” and Edward Constantin, alias “MrZackMorris,” co-founders of Atlas Trading, an online stock trading forum housed on Discord. Other defendants were Thomas Cooperman, also known as “Tommy Coops,” and Gary Deel, also known as “Mystic Mac,” who maintains the “Goblin Gang” YouTube channel. Mitchell Hennessey, alias “Hugh Henne,” Stefan Hrvatin, alias “LadeBackk,” and John Rybarczyk, alias “Ultra Calls” and “The Stock Sniper,” were also charged.
The authorities also charged Daniel Knight, popularly known as “Deity of Dips,” with aiding and abetting the conspiracy by touting the others as successful traders on the “Pennies: Going in Raw” podcast he co-hosts.
The defendants did not immediately respond to requests for comment. On Wednesday, the bio sections of Mr. Constantin, Mr. Hennessey, and Mr. Rybarczyk’s Twitter Inc. profiles featured disclosures such as “I’m still not a financial advisor” and “Ideas shared on Twitter are NOT buy or sell signals.”
According to the SEC, this alleged pump-and-dump scheme has been going on since at least January 2020. The defendants took advantage of their big followings, according to Joseph Sansone, chief of the SEC enforcement division’s market abuse team. He also cautioned investors against taking unsolicited advice from others online.
According to the SEC complaint, all of the defendants had more than 100,000 Twitter followers in December. Mr. Matlock’s Twitter account, which had over 340,000 followers, appeared to have been disabled on Wednesday. According to the lawsuit, the defendants flaunted their affluence online by sharing photographs of their costly cars.
“To their legions of followers on social media, the eight defendants have, for years, promoted themselves as trustworthy stock-picking gurus,” the complaint read. “In reality, they are seasoned stock manipulators.”
The charges filed on Wednesday mirror the SEC’s recent measures against celebrities promoting cryptocurrencies. Kim Kardashian agreed to settle SEC charges in October for pushing a cryptocurrency to investors without revealing how much she was paid for the advertising.
“This case is a reminder that, when celebrities / influencers endorse investment opps, including crypto asset securities, it doesn’t mean those investment products are right for all investors,” SEC Chair Gary Gensler wrote in a tweet in October regarding Ms. Kardashian’s case.
The SEC complaint filed on Wednesday accuses the influencers of a yearslong plan that was typically carried out in three stages. According to the complaint, at least one of them would select a stock to target and allow the others to purchase shares before advertising it online to their followers. They would then promote the stock to their followers and on podcasts, and when that worked, they would sell their shares at greater prices to profit.
According to the SEC, the defendants removed prior posts on Twitter and Discord to conceal the scheme and publicly said that they were not dumping their stock. A recorded audio discussion on Discord between two of the defendants discussing the plan relating to their manipulation of GTT Communications Inc. stocks while watching its stock price climb in real time in March 2021 was also disclosed in the complaint.
“We’re robbing f—ing idiots of their money,” Mr. Knight said, according to the complaint.
In the same conversation, Mr. Cooperman said: “Like what he [Mr. Rybarczyk] does is he alerts it, and then like five minutes later, all his little minions start like retweeting it and saying added with him, so it like builds the hype back up. It happens every single time.”
This debacle took place following FTX’s demise last month, which resulted in the destruction of billions of dollars’ worth of user assets, the cryptocurrency ecosystem has suffered greatly from a lack of trust. FTX was “one of the biggest financial frauds” in history, SDNY says.
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