On Monday, the Securities and Exchange Commission announced it had filed charges against Andrew Left and his firm, Citron Capital LLC, for an alleged $20 million bait and switch fraud scheme.
According to the SEC, Boca Raton, Fla.-based Left used his Citron Research website and related social media platforms to publicly recommend taking long or short positions in 23 companies, saying the positions were consistent with his own and Citron Capital’s positions. The complaint alleges that following his recommendations, the stock price moved more than 12 percent on average. The SEC said that once the recommendations were issues and the stocks moved, Left and citron Capital reversed their positions to capitalize on the stock price movement, and bought back stock immediately after telling his followers to sell, and sold stock immediately after telling his followers to buy.
“Andrew Left took advantage of his readers,” Kate Zoladz, Director of the SEC’s Los Angeles Regional Office said. “He built their trust and induced them to trade on false pretenses so that he could quickly reverse direction and profit from the price moves following his reports. We uncovered these alleged bait-and-switch tactics, which netted Left and his firm $20 million in ill-gotten profits, and we intend to hold Left and his firm accountable for their actions.”
The SEC alleges that Left and Citron Capital made false and misleading statements as a part of the scheme. For example, the SEC said Left and Citron told the market they would stay long on a target stock until the price hit $65, when they began selling the stock at $28. The SEC also alleges that Left and Citron represented to the market that Citron Research was an independent research outlet that did not received compensation from third parties, when in fact, the defendants had entered into compensation agreements with hedge funds.
Left and Citron Capital are charged with violating antifraud provisions of federal securities law, and the SEC is seeking disgorgement, prejudgment interest and civil monetary penalties, an officer-and-director bar and a penny stock bar against Left.
Left also faces charges from the fraud section of the U.S. Department of Justice and the U.S. Attorney’s Office for the Central District of California.