Citron Capital's Andrew Left Charged in Multimillion-Dollar Market Manipulation Scheme

Federal authorities have launched a two-pronged attack against prominent activist short seller Andrew Left and his firm, Citron Capital LLC, alleging a years-long market manipulation scheme that netted millions in illicit profits.

On July 26, 2024, the Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) announced charges against Left, 54, a former Beverly Hills resident now living in Boca Raton, Florida. The allegations stem from Left's activities through his Citron Research website and related social media platforms.

According to the SEC's complaint, Left and Citron Capital engaged in a $20 million fraud scheme involving at least 26 instances of publishing false and misleading statements about stock recommendations for 23 different companies. The SEC alleges that Left would publicly recommend long or short positions, claiming alignment with his own holdings, only to quickly reverse these positions once stock prices moved, typically by more than 12% on average.

Parallel criminal charges filed by the DOJ detail a broader scope of alleged misconduct. A federal grand jury in the Central District of California returned an indictment charging Left 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 estimates the scheme reaped at least $16 million in profits.

The indictment alleges that Left, a frequent guest on financial news channels, exploited his public platform to move stock prices. He allegedly established trading positions before publishing market-moving commentary, often using inexpensive, short-dated options contracts. Left would then quickly close these positions to profit from the resulting price fluctuations, contrary to his public recommendations.

Both the SEC and DOJ highlight Left's alleged misrepresentation of Citron Research as an independent entity free from financial conflicts of interest. The authorities claim Left concealed financial relationships with hedge funds, fabricated invoices, and made false statements about these connections.

Kate Zoladz, Director of the SEC's Los Angeles Regional Office, stated, "Andrew Left took advantage of his readers. 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."

The SEC is seeking disgorgement of ill-gotten gains, civil penalties, and conduct-based injunctions against Left and Citron Capital. Additionally, they are pursuing an officer-and-director bar and a penny stock bar against Left.

If convicted on the criminal charges, Left faces significant prison time: up to 25 years for the securities fraud scheme, 20 years for each securities fraud count, and five years for false statements.

This case involves multiple federal agencies, including the FBI and the U.S. Postal Inspection Service. It serves as a stark warning about the potential for market manipulation and underscores the risks of relying on social media for investment advice. The SEC has reminded investors to be skeptical and avoid making investment decisions based solely on information from unverified platforms.

The charges against Left and Citron Capital represent a significant development in the ongoing efforts to maintain the integrity of financial markets and protect investors from fraudulent practices.

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