The Securities and Exchange Commission (SEC) has just announced that it will be filing charges against eight online influencers in connection with a $100 million securities fraud scheme. In this scheme, the defendants manipulated exchange-traded stocks by using the social media platforms like Twitter and Discord.
Pro Traders Or Manipulators?
In its lawsuit, which was submitted to the United States District Court for the Southern District of Texas, the SEC seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties against each defendant.
The SEC specially mentions Stefan Hrvatin, who goes by the Twitter username “@LadeBackk” as apart from facing the above charges, he will also be barred from trading penny stocks in the market.
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According to the SEC’s official announcement, seven of the eight defendants advertised themselves as accomplished traders and amassed hundreds and thousands of followers on Twitter and in stock trading chatrooms like Discord, starting around early January 2020.
The Grand Scheme
These seven defendants are accused of buying specific stocks and encouraging their sizable social media following to purchase those stocks by publishing price objectives or making it known that they were buying, holding onto, or growing their stock positions in them.
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However, the complaint claims that as the share prices and/or trading volumes increased in the securities they were promoting, the individuals regularly sold their shares without even disclosing their intentions to do so.
SEC’s Official Stance
Joseph Sansone, the Chief of the SEC Enforcement Division’s Market Abuse Unit, officially states that,
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.”, Sansone said.
The SEC’s ongoing investigation is being handled by Andrew Palid, David Scheffler, and Michele T. Perillo of the Market Abuse Unit (MAU).
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