Image: social media influencer, Marco Verch Professional, https://www.flickr.com/photos/30478819@N08/ https://creativecommons.org/licenses/by/2.0/
Eight social media influencers from around the U.S. promoted themselves to their followers as financial whizzes who could pick winning stocks.
The Department of Justice and the Securities and Exchange Commission have charged them with securities fraud for allegedly engaging in a pump-and-dump scheme, raking in about $114 million from January 2020 to April 2022 by selling the stocks they’d promoted at artificially inflated prices.
Pump-and-dump means working to inflate the prices of stocks while pushing them as good investments before dumping them for profit.
Seven of the eight influencers promoted themselves, at least since January 2020, as successful traders, cultivating as many as 1.5 million followers collectively on Twitter and in stock trading chatrooms on Discord. They allegedly bought certain stocks and then encouraged their social media following to buy those stocks by posting price targets or indicating they were buying, holding, or adding to their stock positions, according to the SEC.
However, when share prices and trading volumes rose in the promoted securities, the influencers allegedly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them.
Criminal charges against all were filed by the DOJ’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas. Each defendant faces up to 25 years in prison If convicted.
“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,” said Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit in a Dec. 14 press release. “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.”
The following seven individuals were charged with securities fraud:
Name State of Residence Twitter Handle
Perry Matlock Texas @PJ_Matlock
Edward Constantin Texas @MrZackMorris
Thomas Cooperman California @ohheytommy
Gary Deel California @notoriousalerts
Mitchell Hennessey New Jersey @Hugh_Henne
Stefan Hrvatin Florida @LadeBackk
John Rybarczyk Texas @Ultra_Calls
The defendants used their social media reach to send out “false and misleading information” about the stocks they pumped and dumped as part of the scheme, federal prosecutors said.
Social media influencer Daniel Knight was charged with aiding and abetting the alleged scheme by co-hosting a podcast in which he promoted many of the other seven as expert traders and gave them a forum. Knight also traded in concert with them and regularly profited from it, according to the government.
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They also allegedly ran an online community for individual stock traders called Atlas Trading, which the defendants promoted as one of the largest free online communities in the world for individual stock traders. Its chatroom was called Atlas Trading Discord, prosecutors said.
Matlock’s social media accounts identify him as “CEO of Atlas Trading,” Variety reported. Constantin was a co-founder of Atlas Trading, according to the SEC. Henne and Knight are listed as co-hosts of iHeartRadio’s “Pennies: Going in Raw” stock-market podcast. Deel ran a YouTube channel called “Goblin Gang.” The Twitter bios for Constantin, Hennessey and Rybarczyk included disclosures such as “I’m still not a financial advisor,” or “Ideas shared on Twitter are NOT buy or sell signals,” Wall Street Journal reported.
The complaint also included a recorded voice chat on Discord between two influencers related to their manipulation of GTT Communications Inc. securities while watching its stock price rise in real time in March 2021.
“We’re robbing f—ing idiots of their money,” Knight said, according to the complaint.
“To their legions of followers on social media, the eight defendants have, for years, promoted themselves as trustworthy stock-picking gurus,” the complaint read. “In reality, they are seasoned stock manipulators.”
Criminal charges against all eight were filed in a parallel action by the DOJ’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.
