Market manipulation is nothing new, of course, but both the SEC and DOJ pursued a social media-age method of illegally moving the market last week when they brought securities fraud charges against a Scottish trader whose allegedly used "false tweets" to caused the stock prices of two companies to plunge.
According to the SEC, the trader attempted to capitalize on the declines he created in the stock prices but "waited too long each time to trade the stock and therefore only profited approximately $100 collectively from his manipulations." Despite his inability to actually cash in, the alleged false tweeter, James Alan Craig of Dunragit, Scotland, now faces an SEC action as well as criminal charges filed Thursday by the U.S. Attorney’s Office for the Northern District of California. Craig’s actions are alleged to have caused more than $1.6 million in losses to shareholders.
The SEC’s complaint alleges that Craig created a bogus Twitter account that appeared to belong to the securities research firm Muddy Waters by using the Muddy Waters' logo and a similar Twitter handle. Tweeting from this account, Craig allegedly stated that a company called Audience was "being investigated by DOJ on rumoured fraud charges Full reort [sic] to follow[.]” He ultimately issued "eight false tweets," from that account, causing Audience’s share price to fall from $12.35 per share to a low of $8.87 per share, and for trading in Audience securities to be halted by Nasdaq.
The SEC claims that Craig similarly used another Twitter account that appeared to belong to the securities research firm Citron Research to issue false tweets about a company called Sarepta being under investigation by the FDA. Sarepta’s share price fell from $29.30 just minutes before the tweets to a low of $24.50 -- a drop of approximately 16%.
In the criminal matter, a federal grand jury in San Francisco indicted Craig on Thursday on one count of securities fraud. Acting U.S. Attorney Brian J. Stretch of the Northern District of California said that the allegations against Craig "describe a significant stock price manipulation committed through the use of social media. This prosecution makes clear that we will find and prosecute those who commit fraud on our stock exchanges, by any means, no matter where they reside.”
According to The Guardian, Craig’s current whereabouts are not known and it is also unclear whether he has hired a lawyer.