It is alleged that since at least January 2020, the accused social media influencers “promoted themselves as successful traders,” to encourage their followers to buy stocks that they had purchased.

On December, 14th, 2022, US Prosecutors charged seven social media influencers with using Twitter and Discord to carry out a securities fraud scheme, garnering approximately $114 million from it.

These social media influencers are alleged to promote themselves as successful traders and cultivate hundreds of thousands of followers on Twitter and in stock trading chat rooms on Discord. 

The eighth defendant, Daniel Knight, was charged with aiding and abetting the alleged scheme in the US Securities And Exchange Commission (SEC)’s civil complaint.

Knight, through his podcast, promoted the other defendants as expert traders, directing followers towards their forums. He also had arrangements with others to trade and regularly generate profits from manipulation. 

“Securities fraud victimizes innocent investors and undermines the integrity of our public markets,” said Assistant Attorney General Kenneth Polite of the Justice Department’s Criminal Division.

The DOJ charged all eight defendants with conspiracy to commit security fraud. According to SEC’s press release, the following social media influencers were charged:

Name State of Residence Twitter Handle
Perry Matlock     Texas @PJ_Matlock
Edward Constantin Texas @MrZackMorris
Thomas Cooperman California @ohheytommy
Gary Deel California @notoriousalerts
Mitchell Hennessey New Jersey @Hugh_Henne
Stefan Hrvatin  Florida @LadeBackk
John Rybarczyk Texas @Ultra_Calls
Daniel Knight Texas @DipDeity

It is also alleged that since at least January 2020, these so-called social media influencers “promoted themselves as successful traders,” to encourage their followers to buy stocks that they had purchased.

Further, after the stock prices and/or trading volumes artificially rose, they regularly sold their shares without informing their followers about their plans to dump the securities.

The criminal complaint and civil lawsuit both were filed in the US District Court for the Southern District of Texas. 

What Is Securities Fraud?

Securities fraud, also known as stock fraud and investment fraud, is a type of white-collar crime that happens in the stock and commodity markets. It’s a form of deception used to create fraudulent trades through manipulation or deception.

The goal is to benefit the person committing the fraud while impacting innocent investors and damaging financial markets.

Securities fraud can come in many forms such as insider trading, front-running, pump-and-dump schemes, false advertising, accounting scams and Ponzi schemes. Insider trading occurs when someone with access to important non-public information uses it for their own gain before it becomes public knowledge. Front running involves using information that has not been publicly disseminated to buy or sell securities at an advantage over other investors.

Protect Against Securities Fraud

The first step towards protecting yourself is to do research and make sure you understand the terms associated with any investments you’re considering. Ask questions, look at independent sources of information such as financial magazines and websites, and check the credentials of any financial professionals you’re working with. Be wary if anything seems too good to be true and never invest in something based solely on a salesperson’s promises or claims.

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