How about them apples?

[Gregmal]

https://www.cnbc.com/2024/07/26/short-seller-andrew-left-charged-with-fraud-by-prosecutors-sec.html
 

If this is a new approach to enforcement, can only imagine the other guys out there shitting in their expensive suits right now. 

[UK]

18 minutes ago, Gregmal said:

https://www.cnbc.com/2024/07/26/short-seller-andrew-left-charged-with-fraud-by-prosecutors-sec.html
 

If this is a new approach to enforcement, can only imagine the other guys out there shitting in their expensive suits right now. 

 

Wow! Despite of the fact, that players of such an ilk sometimes could also provide good opportunities, their methods and dealing with them usually makes me feel sick...so f**k them:), as much as possible:)

[Gregmal]

Yup. Notice how smash and grab specialist Mr. Block has been focusing more on non US listed companies? The weasels are definitely worried. 

[gfp]

The way Bloomberg is reporting this, it sounds like it would apply to Keith Gill as well.  Which is surprising to me.  I wonder if the text below represents the actual case against Citron or if there is more to it.

 

“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. 

 

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.

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 US congressional hearings.

[nsx5200]

Eh?  How's his action different from Roaring Kitty?  Or Fahmi Quadir, Greenblatt or even Elon?  Doesn't that type of enforcement also run afoul of freedom of speech?  I hope some court quickly slap the inconsistent enforcement behavior of SEC and US prosecutors in the face.

[Gregmal]

Well the key difference with say, Elon, is that he’s not tweeting something or putting out reports, and then almost immediately trading against what he put out. That’s conman behavior. But these guys call it “risk management” or “seeing if the market agrees with our research” lol. 

[thepupil]

Left seems to be the most egregious in monetization of short term moves, but I did not, until today, know that is was illegal to publish a price target and then take an action inconsistent therewith. 

 

I think there's enough false statements made for SEC to have a case, but I find some of the implications of what is legal / not legal to be both disturbing and far reaching. 

 

Here's the full complaint. 

https://www.sec.gov/files/litigation/complaints/2024/comp-pr2024-89.pdf

 

What I find most interesting about this is the idea that having a price target and then selling / covering at some price different from that price target is "false and misleading" (see the appendix) By this definition, if I on twitter said that I think AIV is worth $16 and then sold half my position at $9, having bought at $6.50, I've made a false and misleading statement, when in fact, I'm merely taking profits. 

 

Now if i did that 25 times and used sensational language and did it on small moves on a number of stocks over very short time frames and told my colleagues i was taking retail investors money like candy from a baby, and i had 100K twitter followers instead of 7K, then maybe the SEC would come after me. But a lot of the individual acts by left here don't seem "false and misleading" to me. 

 

Edited July 26 by thepupil

[Sweet]

I’m all for guys like who are just front running their viewership getting wrecked but I feel like there is a grey area too.

[thepupil]

also, isn't this the whole reason every activist short or long has something like this in their materials/website?

[Gregmal]

4 minutes ago, thepupil said:

also, isn't this the whole reason every activist short or long has something like this in their materials/website?

If your intent is to manipulate the price and your actions confirm that, why should you be able to hide behind stupid disclaimers? 

[Gregmal]

It’s like all these guys who wrap their presentations in myriad “fraud” and “bankrupt” or “criminal” accusations, but then solely for ass covering purposes start it all with “we believe”…they want the easy money but don’t actually want to stand behind their work.

[thepupil]

so I guess my idea of manipulation is making false statements about the company. I don't consider a price target in itself (which is subjective) to be a false statement or misleading. the complaint details Left coming up with a sensational price target (without basis) to move the stock. that's the crux here. But can an opinion on where a stock should trade be false and misleading? If you say you're still "extremely short" something when you've covered 75% of your position, is that illegal? what if beforehand you were simply even more extremely short? 

 

I would assume that a complaint of this nature would include people pumping up a stock (or trying to get it down) by making false/misleading statements about the company  

 

the complaint alleges that Citron's intent to buy/sell the securities at the time of release of information was not disclosed to investors. the "stupid disclaimer" does just that. 

 

just seems like tons of leaps/grey areas/points of concern that when brought to logical conclusion would apply to almost anyone, but in the end, he's going down. no one wins against SEC once they come after you. he's done. 

[DooDiligence]

22 minutes ago, thepupil said:

also, isn't this the whole reason every activist short or long has something like this in their materials/website?

 

The bold print giveth and the fine print taketh away.

Nobody reads the fine print except CoBF'ers.

Edited July 26 by DooDiligence

[Gregmal]

It really just comes down to intent which is the case with most laws and regulations. The issue is you’d never get an honest answer from most of these ethic-less weasels. But the intent almost always is to say something to move the market and then cover as soon as possible. Thats not investing its market manipulation.

Edited July 26 by Gregmal

[ValueArb]

This is just the SECs continuing attack on free spreading. Sounds like Lefts only sin was talking to investigators.

 

Let’s not forget the SEC is loathe to take similar actions against pumpers like Roaring Kitty or Musk, because they are popular, despite their actions hurting investors. Instead it targets short sellers because they are unpopular, despite their actions benefiting investors.

 

[cwericb]

The Muddy Waters case against Fairfax would seem to have been a pretty obvious attempt to move FFH's share price lower simply to make a quick buck.

 

Much of their BS 'facts' about Fairfax were almost immediately proved wrong and shortly after MW's short attack, FFH's share price continued on to set new highs. There should be some sort of a price to pay for that type of blatantly obvious effort to depress the share price of a company. If that wasn't an attempt to manipulate the share price, I don't know what would be. However anyone who was a fan of Carson Block should have had their eyes opened by that little fiasco.

[thepupil]

I think this is a good thread on the matter. 

 

https://x.com/compound248/status/1816878276662497773

[nsx5200]

3 hours ago, ValueArb said:

Let’s not forget the SEC is loathe to take similar actions against pumpers like Roaring Kitty or Musk, because they are popular, despite their actions hurting investors. Instead it targets short sellers because they are unpopular, despite their actions benefiting investors.

 

That along with Greenblatt's book make me think the SEC is shady and at times ineffective.  I'm surprised the courts, with their emphasis on consistency, does not butt head with the SEC more often with such inconsistent enforcement actions.  With the overturn of Chevron, I suspect more people will be willing to fight the SEC, and I seriously hope they win, even though it may encourage more fraudsters.  Such is the price of liberty.

[Parsad]

6 hours ago, nsx5200 said:

Eh?  How's his action different from Roaring Kitty?  Or Fahmi Quadir, Greenblatt or even Elon?  Doesn't that type of enforcement also run afoul of freedom of speech?  I hope some court quickly slap the inconsistent enforcement behavior of SEC and US prosecutors in the face.

 

If they are long and have a substantial position, they are required to file.  Short sellers are not required to produce any SEC disclosure.

 

I have no problem with short-selling if they were required to file their positions and sales.  Should also be no anonymity just like for longs.

 

I also agree that pump and dump longs should be fined or charged as well...but it's hard to prove that sales timing isn't coincidental rather than intended.

 

Cheers!

[Gregmal]

It’s not hard at all! LOL when you take an option position or a substantial equity position, then publicly promote your position, especially with a price target, and then monetize that position on no fundamental change to the thesis, that’s pretty fuckin easy and clear.
 

Is something like this hard?

 

 Jan 8 buy options on xyz 

Jan 9 go on tv and tweet about xyz being worth 5x its current price 

Jan 9/10/11 liquidate substantial majority of position 

 

Fucks sake.

[Gregmal]

Like oh poor baby. How awful that he was put at gunpoint and forced to go on TV and Twitter and make all these claims….half these guys ask to go on TV specifically to talk up their “new idea”.

[Parsad]

1 hour ago, Gregmal said:

It’s not hard at all! LOL when you take an option position or a substantial equity position, then publicly promote your position, especially with a price target, and then monetize that position on no fundamental change to the thesis, that’s pretty fuckin easy and clear.
 

Is something like this hard?

 

 Jan 8 buy options on xyz 

Jan 9 go on tv and tweet about xyz being worth 5x its current price 

Jan 9/10/11 liquidate substantial majority of position 

 

Fucks sake.

 

Problem is that the lawyers will argue what is the appropriate holding period then?  Day-traders and algorithmic traders would have a hissy fit if any sort of minimum holding period was instituted.  They would essentially be out of business if the holding period was set at 24-48 hours...let alone anything longer.  So that will never happen.

 

If they aren't held to that standard, then why should other traders, including hedge fund managers, be held to such a standard.  So it ends up being that increased disclosure is the only thing really possible, so that there is as much transparency as possible for the public.  Cheers!

 

[nsx5200]

In my mind, there are plenty of those type of shady actions happening in traditional retail investment space.  One side of the house will promote one investment, while the other side of the house will advise, or even dump the same investment.  These conflict of interest have dribble in and out of the news, even from the big 'well regarded' investment houses, and AFAIK, no real significant actions were taken against them.  Why go after the big fish when the little fishes are easier to catch? 

 

The biggest problem with Left is that he didn't grow big enough not to prosecute.  Too big to fail, too big to prosecute.  Just like in 2008.

 

If anything, I wouldn't mind something like what they did with the tobacco industry.  Force anybody that hawks investment to have a standard disclaimer, and possibly have a softer solution like a TrustPilot/Yelp review of sorts that ranks the trustworthiness of their statements.  That's just a off the cuff thinking (and I'm no Charlie), so the correct solution may take a few iterations to get right.  Hard regulations like always have strange technical loopholes as well as unintended side effects, like people have mentioned above.

[ValueArb]

1 hour ago, Gregmal said:

It’s not hard at all! LOL when you take an option position or a substantial equity position, then publicly promote your position, especially with a price target, and then monetize that position on no fundamental change to the thesis, that’s pretty fuckin easy and clear.
 

Is something like this hard?

 

 Jan 8 buy options on xyz 

Jan 9 go on tv and tweet about xyz being worth 5x its current price 

Jan 9/10/11 liquidate substantial majority of position 

 

Fucks sake.

 

 

If you were correct, the question is why doesn't the SEC do anything about stock pumping? When was the last time they prosecuted a case like the one  you describe? One reason is that there is nothing wrong with making a recommendation and then trading after its been made public. If you think the IV of XYZ is 5x so you buy it, publicize your research, and the stock jumps you still have the right to sell it. Even if its below your best case intrinsic value estimate there is the time value of money, risk that you are wrong, and sometimes even the next day you can realize you were too optimistic.

 

In the case of Left and Citron the SEC complaint is made of tissue paper. They "allege" he issued recommendations on stocks he thought were overvalued, and then sold as soon as they declined in price. Uh, that's exactly how short selling works. If your research shows that Stock A trading at $10 has substantial problems and after you publicize them and opine it might be worthless it declines to $7, why wouldn't you sell some or all of your position? There is always risk that it will rebound with a company PR effort to refute your findings, you may not have time to wait or want to wait until lawsuits/bankruptcy proves your thesis and you might even be wrong. Selling after publicizing is not evidence of any illegal or unethical behavior.

 

Quote

Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements. As a consequence, Left bought back stock immediately after telling his readers to sell, and he sold stock immediately after telling his readers to buy.

 

It will probably revolve around how much heavy lifting the words "quickly" and "immediately" are doing in the SEC press release. But it seems absurd to claim that it was "immediate", he has to publicize his finding well enough to his clients and publicly for the stock to actually move before he can close his own positions. So clearly his clients knew the information before he traded, so  they were fully informed and at what prices they bought/sold are their decisions.

 

The only allegation that looks legit is the charge of lying about hedge funds paying them. There should be nothing wrong in accepting compensation from hedge funds for your part in finding and publicizing frauds, but it's always a crime to lie to a federal agent. If his hedge fund arrangements were legal, I don't know why Left lied. Maybe because he did not want it publicly known he was working with and accepting payments from hedge funds since it looks bad to the retail crowd and he'd was already taking a lot of flack that might have been impeding his ability to get clients/investors. So now he's probably on the Martha Stewart track, where they weren't able to show she committed insider trading, but were able to put her in prison for lying to a federal investigator as evidence she was part of a conspiracy to help cover up her brokers insider trading. Left may have been suffering from "Martha Steward Ego" where he thought he was smarter than the feds.

 

Short selling is a brutally tough business, which is maybe why it seems to attract tough minded people with massive enough egos to be willing to shoulder relentless public derision and maybe those attributes are too often paired with habitual line crossing and ethical weaknesses. If so its sad, because short sellers in aggregate do far more to protect investors than the SEC ever has, so those that actually do commit fraud are undercutting the beneficial work of the rest.

Edited July 26 by ValueArb

[Gregmal]

42 minutes ago, Parsad said:

 

Problem is that the lawyers will argue what is the appropriate holding period then?  Day-traders and algorithmic traders would have a hissy fit if any sort of minimum holding period was instituted.  They would essentially be out of business if the holding period was set at 24-48 hours...let alone anything longer.  So that will never happen.

 

If they aren't held to that standard, then why should other traders, including hedge fund managers, be held to such a standard.  So it ends up being that increased disclosure is the only thing really possible, so that there is as much transparency as possible for the public.  Cheers!

 

Can we simplify then? How bout, dont transact for 3 days before or after going on TV or social media? Especially against your public campaign? Or simply, stay off TV and social media if all youre gonna do is hawk shoddy investments? For all the bs Bill Ackman gets, I dont see him dumping the same day he's doing promos....

 

Acting like these people have a god given right to go use the media to move their holdings just for the sake of allowing them to dump into that is crazy to me. NO integrity.