The Securities and Exchange Commission (SEC) has filed charges against activist short seller Andrew Left and his firm, Citron Capital, for allegedly running a $20 million "fraud scheme."
According to the SEC, Left used "bait-and-switch" tactics to mislead investors through false and misleading statements about his stock trading recommendations.
The SEC's complaint claims that Left, based in Boca Raton, Florida, utilized his Citron Research website and social media platforms at least 26 times to recommend long or short positions in 23 different companies.
He presented these positions as aligning with his own and Citron Capital's holdings. Following these recommendations, the stocks in question experienced average price movements of over 12%.
However, the SEC alleges that once these recommendations caused stock price fluctuations, Left and Citron Capital quickly reversed their positions to exploit the changes, buying back stocks they had advised selling and selling stocks they had advised buying.
"Andrew Left took advantage of his readers," stated the Director of the SEC's Los Angeles Regional Office. "He built their trust and induced them to trade on false pretenses so that he could quickly reverse direction and profit from the price moves following his reports."
"We uncovered these alleged bait-and-switch tactics, which netted Left and his firm $20 million in ill-gotten profits, and we intend to hold Left and his firm accountable for their actions," added the Director.
The SEC's complaint also alleges that Left and Citron Capital made several false statements. For instance, they claimed they would stay long on a stock until it hit $65, but began selling at $28.
They also allege that Left falsely represented Citron Research as an independent outlet that never received compensation for publishing information, while they had compensation arrangements with hedge funds.
Filed in the United States District Court for the Central District of California, the SEC's complaint charges Left and Citron Capital with violating antifraud provisions of federal securities laws.
Furthermore, the Department of Justice and the U.S. Attorney's Office for the Central District of California also announced charges against Left.