The US authorities have accused eight tweeters this Wednesday of colluding to recommend to their followers to invest in securities that they had previously bought to inflate the price and make a profit by selling them when their price rose. The operation reported a benefit of 100 million dollars, according to calculations by the Department of Justice and the SEC, the stock market regulator.
From the beginning of 2020 until mid-April, the eight defendants, with 1.5 million followers in total, maintained a pump and dump scheme (inflate and throw away-sell). They presented themselves as successful traders on Twitter and Discord and recommended their followers or readers to buy certain securities, according to the SEC. When the prices or trading volume of the shares they promoted rose, these financial influencers “sold their shares without ever disclosing their plans to divest the securities while promoting them,” the regulator said. In fact, they said that they were going to hold them for the long term, that they were buying more shares or that they would not do so until they reached a certain price.
The operation was at full capacity during the months of the pandemic confinement and the phenomenon of mass investment in doubtful future securities via Reddit and WallStreetBets. If the accusation is successful, they face up to 25 years in prison for conspiracy to commit fraud in the stock market.
Distributed in various parts of the country, such as Texas, California, New Jersey and Florida, those investigated presented themselves as successful traders on Twitter and the social network Discord. The Justice Department says they exhibited “extravagant lifestyles” with luxuries to fool others into thinking they were skilled traders. “They used social media to amass a large number of novice investors as followers and then took advantage of them by repeatedly feeding them misinformation,” an SEC spokesperson said. “Today we expose the true motivation of these alleged scammers and serves as another warning of that investors should be careful with the advice they find online.
The defendants are Perry Matlock (@PJ_Matlock on Twitter), John Rybarcyzk (@Ultra_Calls), Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy) and Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne) and Stefan Hrvatin ( @LadeBackk). The eighth is Daniel Knight (@DipDeity) who co-hosted a podcast promoting defendants as experts and doing agreed trades with them.
Some of these accounts have already disappeared, while others have worked to change their profile description to clarify that they do not make investment recommendations and you should not invest based on social networks. At some point they even mocked the SEC. “Most Wanted”
The SEC is increasingly cracking down on social media influencers and celebrities who promote financial products, including cryptocurrency. In October, Kim Kardashian was banned from promoting cryptocurrency for 3 years and fined her $1 million for recommending investing in cryptocurrency-linked assets to her 330 million Instagram followers without clarifying that she was paid to do so. In 2020 actor Steven Seagal paid $300,000 for a similar act. And a couple of years earlier, boxer Floyd Mayweather and music producer DJ Khaled were charged for failing to report that they were paid to promote investments in digital currencies.
