SEC, DOJ accuse social media influencers of alleged $100 million fraud

The US Securities and Exchange Commission (SEC) seal is seen at its headquarters in Washington, DC on May 12, 2021.

Andrew Kelly | Reuters

Federal prosecutors and the Securities and Exchange Commission on Wednesday accused seven social media influencers of using Twitter and Discord for securities fraud that earned them more than $100 million in illicit profits.

An eighth influencer has been charged with aiding and abetting the alleged scheme in the SEC’s civil lawsuit and conspiring to commit securities fraud in the Justice Department’s criminal case.

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The seven accused of securities fraud were also charged by the DOJ with conspiracy to commit securities fraud. Authorities claimed the defendants used the social media platforms to manipulate publicly traded stocks in a scheme dating back at least to January 2020. Through widespread Twitter accounts and stock trading chat rooms on Discord, these defendants allegedly “advertised themselves to be successful traders.” to an SEC press release and encouraged followers to buy stocks they had bought.

But they didn’t tell their followers when promoting these stocks that they intended to sell shares once prices or trading volume rose, the DOJ and SEC claimed. The influencers made a profit by driving stock prices up and then selling as they rose, earning about $100 million in total.

Department of Justice chart detailing those accused in alleged pump-and-dump fraud.

Ministry of Justice

Each of the defendants had well over 100,000 Twitter followers as of this month, the SEC complaint said. One of those accounts, @PJ_Matlock — run by Texas-based Perry Matlock, who describes himself as the CEO of Atlas Trading — ceased to exist as of Wednesday. The other main defendants facing securities fraud allegations and their Twitter names are Edward Constantinescu aka Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne), Stefan Hrvatin (@ LadeBackk) and John Rybarcyzk (@Ultra_Calls).

Daniel Knight (@DipDeity) has been indicted by the SEC for aiding and abetting and by the DOJ for conspiracy in the alleged scheme, in part by co-hosting a podcast that promoted some of the key defendants as skilled traders. Authorities claimed Knight also traded with the other defendants and saw profits from the scheme.

As of at least Wednesday, some of the defendants’ Twitter bios have included disclaimers that appear to attempt to mitigate their legal risks. For example, Constantinescu’s account says, “All my tweets are just my opinions. I’m still not a financial advisor. Spoof account.” Hennessey’s says, “All my opinions. I actively trade positions. Not a professional, not financial advice, probably do the opposite.” Rybarcyzks reads: “DISCLAIMER: My tweets are NOT recommendations to buy a stock. – Ideas shared on Twitter are NOT buy or sell signals. DO NOT ACT BASED ON SOCIAL MEDIA.”

Knight’s bio reads, “NEVER buy/sell my tweets.”

Both the criminal complaint and the civil complaint have been filed in the US District Court for the Southern District of Texas.

Twitter and Discord did not immediately respond to requests for comment.

Three of the influencers charged under the program who had open direct messages on Twitter — Deel, Rybarcyzk and Knight — did not immediately respond to CNBC’s requests for comment. Messages to Instagram accounts apparently linked to Matlock, Constantinescu, and Cooperman were not immediately replied to. A message to a LinkedIn account that appeared to be linked to Hennessey did not immediately respond to a request for comment. Contact information for Hrvatin could not be found immediately.

Clarification: This story has been updated to reflect that the defendant Edward Constantinescu is also known as Edward Constantin.

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