The SEC has announced charges against Andrew Left and his company, Citron Capital LLC, for participating in a multi-year, $20 million scheme to defraud followers by publishing false and misleading statements about their purported securities trading recommendations.
The SEC’s complaint alleges that Left, who resides in Boca Raton, Florida, used his Citron Research website and related social media platforms on at least 26 occasions to publicly recommend taking long or short positions in 23 companies, claiming that these positions were consistent with his own and Citron Capital’s positions.
The complaint alleges that following Left’s recommendations, the targeted stock prices moved by an average of more than 12%. According to the complaint, once the recommendations were issued and the stock prices moved, Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements.
As a result, Left bought back shares immediately after telling his readers to sell and sold shares immediately after telling his readers to buy, the SEC’s statement adds.
“Andrew Left took advantage of his readers. He earned their trust and induced them to trade on false pretenses so he could quickly reverse course and profit from the price movements following his reports,” said Kate Zoladz, Director of the SEC’s Los Angeles Regional Office.
Zoladz added that these alleged bait-and-switch tactics led Left and his company to illicitly gain $20 million in profits and emphasized that the SEC seeks to hold Left and his firm accountable for their actions.
Among the “false and misleading” statements cited by the SEC, the complaint alleges that the defendants told the market they would stay long on a target stock until its price reached $65 when, in reality, they began selling the stock immediately at $28.
The SEC also alleges that they falsely claimed Citron Research was an independent research medium that had never received compensation from third parties for publishing information about target companies, whereas the defendants had actually signed compensation agreements with hedge funds.
The SEC’s complaint, filed in the U.S. District Court for the Central District of California, charges Left and Citron Capital with violating the anti-fraud provisions of the federal securities laws. Among other remedies, the complaint seeks disgorgement, prejudgment interest, and civil penalties against Left and Citron, as well as conduct-based injunctions, an officer and director bar, and a penny stock bar against Left.
In a parallel action, the DOJ’s Fraud Section and the U.S. Attorney’s Office for the Central District of California announced charges against Left.
Additionally, the SEC previously settled public administrative charges against the Dallas-based registered investment advisor Anson Funds Management LP and the Toronto-based exempt reporting advisor Anson Advisors Inc. for conduct related to their relationship with Left and other short-selling publishers.
