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SEC charges 8 social media influencers, alleging $100M pump-and-dump stock scheme

The U.S. Department of Justice and the Securities and Exchange Commission filed parallel lawsuits against eight social media influencers, alleging they engaged in a pump-and-dump stock manipulation scheme that fleeced their followers out of $100 million.

The SEC announced fraud charges on Wednesday against seven self-proclaimed “FinTwit” financial gurus on Twitter: Perry Matlock a/k/a “PJ Matlock;" Edward Constantin a/k/a “Edward Constantinescu” and “MrZackMorris;” Thomas Cooperman a/k/a “Tommy Coops;” Gary Deel a/k/a “Mystic Mac;” Mitchell Hennessey a/k/a “Hugh Henne;” Stefan Hrvatin a/k/a “LadeBackk;” and John Rybarcyzk a/k/a “Ultra Calls,” a/k/a “The Stock Sniper.”

The agency said the influencers violated securities laws by secretly dumping exchange-traded stocks that they had earlier promoted to their followers on Twitter and Discord.

Another defendant named in the SEC’s action, podcaster Daniel Knight a/k/a “Deity of Dips,” was charged with aiding and abetting the alleged scheme. Knight, the co-host of a popular podcast, used the program to promote many of his co-defendants and profited off of their alleged fraud, the agency said.

“These seven defendants allegedly purchased certain stocks and then encouraged their substantial social media following to buy those selected stocks by posting price targets or indicating they were buying, holding, or adding to their stock positions,” the agency said in a press release. “When share prices and/or trading volumes rose in the promoted securities, the individuals regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them.”

A screen displays the Dow Jones Industrial Average over the 20,000 mark following the closing bell on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 25, 2017. REUTERS/Brendan McDermid
A screen displays the Dow Jones Industrial Average over the 20,000 mark following the closing bell on the floor of the New York Stock Exchange (NYSE) in New York, U.S., January 25, 2017. REUTERS/Brendan McDermid (Brendan McDermid / reuters)

According to the SEC’s complaint, each of the defendants included disclaimers on their Twitter accounts, saying their posts were not meant to provide stock recommendations or financial advice. However, the agency said the defendants “intended for their followers to act on their promotional tweets, and understood that their followers would do so.”

For example, Constantin told Knight in an interview, “I understand that if I call something, you know, everybody and their mom is going to buy,” the agency said.

Both lawsuits were filed in the U.S. District Court for the Southern District of Texas. The agency is asking for an injunction to stop the alleged offenses and to claw back from the defendants money gained in the alleged scheme. The agency requests that Hrvatin be barred from trading penny stocks.

Criminal charges against all eight individuals also were filed in a parallel action brought by the Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.

“FinTwit,” the SEC explained in its complaint, refers to the community of Twitter users that regularly tweet about finance and the stock market.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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