Andrew Left of Citron Research has been charged with criminal and civil charges for market manipulation and fraud
On July 26, U.S. authorities charged well-known activist short seller Andrew Left and his fund, Citron Capital, accusing them of market manipulation and defrauding investors by making misleading statements about their positions in various stocks, including Nvidia and Tesla.
The Justice Department and the Securities and Exchange Commission (SEC) announced on Friday that Left allegedly used his social media platforms and cable news appearances to promote what he claimed were his long or short trades. He would then quickly reverse these positions, reportedly earning as much as $20 million in the process.
The Justice Department also claimed that Left concealed the fact that third parties, such as hedge funds, influenced his commentary. In exchange for compensation, he allegedly informed these parties of his positions before making them public, allowing them to profit or avoid losses.
"To maintain the false appearance that Citron’s recommendations and positions were sincerely held, defendant Left made false and misleading representations and half-truths about his economic incentives, conviction in Citron’s analyses, and valuations of Targeted Securities," the DOJ stated.
Left's attorney, James Spertus, said that Left plans to contest the charges. "There is no crime here," Spertus stated in an email. "Mr. Left is a publisher who has taken extraordinary steps to comply with all laws, and neither the DOJ nor the SEC allege that he ever once published information he believed was not true when published."
Left is expected to be arraigned in the coming weeks in United States District Court in downtown Los Angeles.
Known for his dramatic and outspoken style, Left has been a prominent figure among "short activists" for over a decade. These activists claim to bet against public companies based on the belief that they are overvalued or engaging in fraud. Left's high-profile targets have included China Evergrande, GameStop, Valeant Pharmaceuticals, and Shopify. While proponents of short activism argue that these activities play a crucial role in the market, critics accuse them of using "short and distort" tactics that can unfairly damage public companies.
The charges are the result of a years-long investigation by criminal prosecutors in Washington and Los Angeles and SEC investigators, which began looking into short-sellers and hedge funds in 2019. Bloomberg first reported the DOJ probe in December 2021.