U.S. authorities filed criminal and civil charges against prominent activist short seller Andrew Left for an alleged long-running market manipulation scheme involving bets on stocks including Nvidia (NVDA.O) and Tesla (TSLA.O), they said on Friday.
Left used his Citron Research website and social media platforms to recommend long or short positions in 23 companies, telling followers they were consistent with his own positions, authorities have alleged. Then he and Citron Capital, his trading firm, quickly reversed positions to capitalize on stock price movements, they said.
Left for more than a decade has been one of the prominent so-called “short activists”, who say they bet against public companies on the basis they were overvalued or engaging in fraud.
Among Left’s most high-profile targets were the now bankrupt China’s Evergrande, GameStop (GME.N), Valeant Pharmaceuticals and Shopify. Fans of short activists say they play a crucial role in the market, but critics have accused them of “short and distort” tactics.
Criminal prosecutors have now charged the prominent activist short seller with multiple counts of securities fraud for what the DOJ deemed a $16 million market manipulation scheme, and the SEC separately sued him over a $20 million fraud scheme, the authorities said in statements on Friday.
Left, 54, declined to comment.
For years, criminal prosecutors in Washington and Los Angeles and investigators for the SEC have been probing short sellers over potential market manipulation.
"To maintain the false pretense that Citron’s recommendations and positions were sincerely held, defendant Left made false and misleading representations and half-truths about his economic incentives, conviction in Citron’s analyses, and valuations of Targeted Securities," the DOJ said.
Left is expected to be arraigned in the coming weeks in United States District Court in downtown Los Angeles.
If convicted, he would face a statutory maximum sentence of 25 years in federal prison for the securities fraud scheme count, up to 20 years in federal prison for each count of securities fraud, and up to five years in federal prison for the false statements count, the DOJ said.
