The U.S Security and Exchange Commission and the Department of Justice have filed parallel lawsuits against seven social media influencers and one podcaster accused of drawing their followers into a $100 million pump-and-dump scam.
The defendants are accused of violating securities laws by secretly dumping stocks they had promoted to their followers on Twitter and Discord.
Today we announced charges against eight social media influencers in a $100 million securities scheme in which they used Twitter and Discord to manipulate exchange-traded stocks.https://t.co/zzrchqFlqg
— U.S. Securities and Exchange Commission (@SECGov) December 14, 2022
According to the lawsuit filed with the U.S. District Court for the Southern District of Texas, the seven social media influencers falsely promoted themselves as “trustworthy stock-picking gurus.” The lawsuit claimed the defendants bought stocks ripe for manipulation and recommended those stocks as suitable investments to their legions of followers.
The seven defendants encouraged their followers to buy those stocks by posting price targets or indicating that they were buying, holding or adding to their stock positions. However, the defendants would regularly dump those stocks as soon as trading volumes or share prices rose.
“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 Chief of the SEC Enforcement Division’s Market Abuse Unit, Joseph Sansone.
The lawsuit identified the defendants, along with their Twitter handles, as Perry Matlock (@PJ_Matlock), Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne),
Stefan Hrvatin (@LadeBackk) and John Rybarczyk (@Ultra_Calls).
The agency also charged Daniel Knight (Twitter handle: @DipDeity) with aiding and abetting the alleged pump and dump scheme. The lawsuit accused Knight of co-hosting a podcast where he promoted some of the other defendants as expert traders and provided them a forum for their manipulative statements.
The lawsuit also claims that Knight traded in concert with the defendants and made financial gains from the stock manipulation schemes.
Sansone said the lawsuit exposed the Frye motivations of the “alleged fraudsters” and serves as a warning to investors to be wary of unsolicited advice they encounter online.
The lawsuit is seeking a penny stock bar against Hrvatin as well as permanent injunctions, disgorgement, prejudgment interest, and civil penalties against all defendants.