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Highlights
- GameStop short seller Andrew Left is currently facing a lawsuit initiated by the SEC.
- The SEC accused Left and Citron Research of manipulating stock prices for their profit.
- The list of stocks hit by fraudulent manipulation includes GameStop, Tesla, Nvidia among others.
Andrew Left, a prominent short seller known for his role in the GameStop trading frenzy, is currently facing serious legal trouble from the U.S. Securities and Exchange Commission (SEC). Now, his deleted posts on the social media platform X (formerly Twitter) have resurfaced in a Justice Department indictment. Moreover, the indictment accuses Left of market manipulation and lying to investigators. They also questioned the legality of his past stock commentary and trading practices.
Prosecutor Arguments In GameStop Seller Andrew Left’s Case
Andrew Left and his research firm, Citron Research, gained significant attention during the GameStop short squeeze in early 2021. Left, who had taken a short position on GameStop, publicly criticized the company. He described it as overvalued and predicting its stock price would fall.
However, retail investors, largely mobilized through the Reddit community r/WallStreetBets, drove up GameStop’s stock price. This resulted in substantial losses for short sellers like Left. According to the Justice Department, Andrew Left’s deleted X posts were part of a broader strategy to manipulate the market for his benefit.
Hence, the indictment alleges that Left used the Citron Research account to create “catalysts,” events that could have significant effect on stock prices. Thus, he allegedly profited from his advance knowledge of these market movements.
However, James Spertus, Left’s defense attorney, argued that the indictment misrepresents Left’s actions. Spertus insists that Left’s posts represented his genuine views and that it’s “preposterous” to claim they could significantly move large-cap stocks. Moreover, he argued that Left’s reports included disclaimers advising against trading based on his posts.
Also, the lawyer noted that that all the information Left shared was public, not insider knowledge. In addition, the defense lawyer emphasized that there is no correlation between a stock’s target price and the price at which Left would close his short position. Furthermore, he stated that assuming such a connection is a governmental error, according to a Bloomberg report.
The short seller, who pleaded not guilty in LA this week, is potentially facing decades in prison if found guilty. If the SEC lawsuit against Left goes to trial, it could reveal how short sellers use social media. It might also help distinguish between honest commentary and intentional market manipulation.
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Overview of Stock Manipulation By Left
Andrew Left’s indictment details several instances where Left allegedly manipulated stock prices through misleading X posts:
1. Roku Inc.: On January 8, 2019, Left shorted Roku and then labeled the stock “uninvestible” on X. He later deleted the post and replaced it with a more neutral statement. Hence, prosecutors allege this was an intentional effort to manipulate the stock’s price, from which Left profited $700,000.
2. Beyond Meat Inc.: In mid-May 2019, Left built a short position in Beyond Meat. On May 17, he posted disparaging remarks about the company on X. This caused a drop in stock price. He quickly closed his position, earning substantial profits within minutes of his post.
3. American Airlines Group Inc.: On June 5, 2020, Left shorted American Airlines and then posted a negative assessment of the company’s balance sheet. Prosecutors say he closed his position within 43 minutes, making $429,000.
4. Cronos Group Inc.: Left shorted Cronos Group and posted negative comments about the cannabis company on August 30, 2018. Moreover, he began closing his position shortly after his posts, reducing his pre-tweet position by 61% by the end of the day.
5. Tesla Inc.: On October 23, 2018, Left promoted his long position in Tesla stock on X, only to sell more than half of his position minutes later, earning $1 million. He continued to sell off his position over the next trading day, making a total profit of $6.6 million.
6. Nvidia Corp.: On November 20, 2018, Left received a tip and bought Nvidia stock, promoting it on X shortly after. Therafter, he sold all his shares within two hours, making $930,000.
7. Facebook Inc.: On December 26, 2018, Left bought Facebook shares and posted a favorable analysis two days later. He started selling his shares within hours, making $680,000 in profit.
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