U.S. accuses short-seller Andrew Left of securities fraud

Article content

Authorities in the United States have accused famed short-seller Andrew Left of committing fraud through stock trades, social media posts and research reports in their biggest move yet in a years-long crackdown against traders who tout their bearish bets.

The U.S. Securities and Exchange Commission (SEC) on Friday alleged Left used his firm, Citron Research, to generate about US$20 million in profits from illegal trading involving almost two dozen companies. The U.S. Justice Department also announced a criminal case against Left, accusing him of securities fraud. Left had no immediate comment.

Article content

The cases against Left stem from a wide-ranging U.S. effort to examine relationships between hedge funds and skeptical researchers. The probes have been rattling the industry for three years as investigators have sought information on dozens of money managers and activists, as well as transactions involving more than 50 stocks.

Article content

According to the SEC, Left would make recommendations about a stock, on which he had short or long positions, sometimes giving a target price at which he thought the stock would trade. The Justice Department said Left would create a false perception that his public comments on a stock were in line with his trading activity.

“Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money,” the Justice Department said in its statement.

Stock trades

Left, according to prosecutors, would also quickly close positions after releasing a research report or making comments. That would let him take advantage of short-term price movements.

Article content

According to the SEC, Left’s misconduct touched stocks including Roku Inc., American Airlines Group Inc. and Nvidia Corp.

“This fraudulent practice deceived investors and allowed Left to use his Citron Research reports and tweets as catalysts from which he could derive short-term profits,” the SEC alleged in the complaint.

The mere appearance of research from a prominent bear can send a stock into a tailspin before the market has time to debate its merit, which can be especially hard on small investors who can’t react quickly. Companies and shareholders have increasingly cried foul, prompting U.S. congressional hearings.

Left has also targeted companies in Canada in the past, including Shopify Inc., Valeant Pharmaceuticals International Inc. (now known as Bausch Health Cos. Inc.) and Canadian cannabis producers.

— With assistance from Katherine Burton and files from the Financial Post.

Bloomberg.com

Article content