Short Seller Andrew Left Is on the Hook for Securities Fraud

Andrew Left and his company Citron Research are facing a securities fraud lawsuit from the U.S. Securities and Exchange Commission (SEC) alleging that the famed short seller profited from misleading comments about stocks.

The U.S. Department of Justice (DOJ) also announced a criminal case against Left on Friday.

The SEC contends that Left and his company made “illegal trading profits” of about $20 million by trading in a manner contrary to what they told investors.

Like Taking ‘Candy From a Baby’

“In other words, Left bought back the stock almost immediately after telling his readers to sell, and Left sold stock almost immediately after telling his readers to buy,” the SEC said, noting that the short seller profited from short-term price swings that resulted from his misleading commentary.

Left and his firm’s strategy also involved quickly selling or buying stocks at levels far different from the price targets they gave investors who followed their research or tweets, the SEC said.

“Left bragged to colleagues that some of these statements were especially effective at inducing retail investors to trade based on his recommendations and said that it was like taking ‘candy from a baby,'” the lawsuit said.

Left Allegedly Engaged on Fraudulent Trades on 23 Firms, Including Nvidia

According to the SEC, between March 2018 and December 2020, Left and his company engaged in trades in 23 companies on 26 separate occasions, including Nvidia (NVDA), Tesla (TSLA), American Airlines (AAL), Facebook (now META), Roku (ROKU), Alibaba (BABA), Twitter (now X and not publicly traded), GE, and Palantir (PLTR).

The SEC also said that Left, via his media appearances, created the image of a “successful hedge fund” when, in fact, the fund had no outside investors, and traded only his money.

The regulator also alleges that Left received compensation from a hedge fund that traded based on his recommendation although the short seller denied such an arrangement.

SEC Seeks To Bar Left From Penny Stock Offerings

Apart from seeking the millions Left generated from his trades, the SEC is also seeking that Left be barred from participating in any penny stock offering. The regulator also is seeking that Left or any entity controlled by him not be allowed to trade in securities for at least five days after he has made any commentary public.

DOJ Announces Criminal Case Against Left

The Justice Department also announced a criminal lawsuit against Left for stock market manipulation, alleging he reaped “at least $16 million” in profits.

“Left is charged with one count of engaging in a securities fraud scheme, 17 counts of securities fraud, and one count of making false statements to federal investigators,” the DOJ said. “If convicted, he faces a maximum penalty of 25 years in prison on the securities fraud scheme count, 20 years in prison on each securities fraud count, and five years in prison on the false statements count.”

James Spertus, an attorney representing Left said that neither agency alleges that information Left published was not believed to be true at the time of publication. He called the case against Left “defective,” stating that all of Left’s publications contained detailed disclosures.

“The fact that the Mr. Left trades in the securities he researches and writes about is well known to everyone, and there is no rule or law requiring a publisher who discloses that he is trading to also publish his private trading intentions,” Spertus said in a statement.