The U.S. government has charged eight social media influencers with securities fraud, alleging they used Twitter and messaging app Discord to manipulate exchange-traded stocks as part of a $100 million fraud scheme.
The Securities and Exchange Commission (SEC) said in a release that seven of those charged promoted themselves as successful traders and gained hundreds of thousands of followers on Twitter and in stock trading chatrooms on Discord since January 2020.
They allegedly bought certain stocks and encouraged their followers to do the same by indicating that they were buying, holding or adding to their stock positions.
But an SEC complaint states that when share prices or trading volumes rose in the promoted stocks, they regularly sold their shares without disclosing their plans to drop their securities.
“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.
The SEC complaint seeks civil penalties against the individuals. The Department of Justice, which has filed criminal charges against the eight men accusing them of conspiracy to commit securities fraud, said the defendants profited at least $114 million through the alleged scheme.
The individuals being charged are Perry Matlock of Texas, Edward Constantin of Texas, Thomas Cooperman of California, Gary Deel of California, Mitchell Hennessey of New Jersey, Stefan Hrvatin of Florida and John Rybarczyk of Texas.
The complaint also charges Daniel Knight with aiding and abetting the scheme by co-hosting a podcast in which he promoted many of the charged individuals as expert traders and gave them a forum. Knight regularly generated profits from the alleged manipulation, authorities say.