The SEC charged seven “social media influencers” — who had amassed hundreds of thousands of followers on Twitter and Discord — with securities fraud, alleging they manipulated stock prices to reap at least $100 million in ill-gotten gains. The agency also issued a charge against an eighth individual with allegedly aiding and abetting the “scheme.”
In addition, criminal charges against all eight individuals were filed by the Justice Department’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas. If convicted, each defendant faces a maximum penalty of 25 years in prison for conspiracy to commit securities fraud and each charged count of securities fraud. The DOJ said the group profited at least approximately $114 million from their scheme from around January 2020 to April 2022.
According to the SEC, since at least January 2020, seven of the defendants promoted themselves as “successful traders,” allegedly having purchased certain stocks and then encouraging their “substantial social media following” to buy the stocks by posting price targets or indicating they were buying, holding or adding to their stock positions. In fact, however, when share prices and/or trading volumes rose in the securities they were hyping, the individuals “regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them,” according to the agency.
The SEC and DOJ did not disclose which stocks were promoted in the alleged pump-and-dump scheme.
In addition to their Twitter accounts, which collectively represented more than 1.5 million followers, the DOJ alleged that the defendants ran an online community for individual stock traders called Atlas Trading, which “defendants promoted as one of the largest, free online communities in the world for individual stock traders” and which had a chatroom called Atlas Trading Discord. The defendants allegedly used Atlas Trading’s Discord channel to disseminate “false and misleading information about securities” that they pumped and dumped as part of the scheme, per the DOJ.
The following seven individuals were charged with securities fraud, identified by the SEC along with their Twitter account names: Perry Matlock (@PJ_Matlock), Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne), Stefan Hrvatin (@LadeBackk) and John Rybarcyzk (@Ultra_Calls).
Matlock’s social media accounts identify him as “CEO of Atlas Trading” and “CEO of Fintwit.” As of Wednesday, his Twitter account appears to have been deleted.
In addition, the SEC charged Daniel Knight (Twitter handle @DipDeity) with aiding and abetting the alleged scheme by, among other things, co-hosting a podcast in which he “promoted many of the other individuals as expert traders and provided them with a forum for their manipulative statements.” Per the complaint, Knight also traded “in concert” with the other defendants and also regularly generated profits from the manipulation.
Henne and Knight are listed as co-hosts of iHeartRadio’s “Pennies: Going in Raw” stock-market podcast. The show’s description includes a disclaimer that “The above references and podcast are opinions and are for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.” A rep for iHeartMedia said the company was looking into the charges against the two men.
“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 announcing the charges. “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 SEC’s complaint, filed in the U.S. District Court for the Southern District of Texas, seeks permanent injunctions, disgorgement, prejudgment interest and civil penalties against each defendant, as well as a “penny stock” ban against Hrvatin.
In August, the SEC’s Office of Investor Education and Advocacy issued an investor alert on “Social Media and Investment Fraud” at investor.gov.
