SEC Charges 8 Social Media Influencers In Alleged $100M Stock Manipulation Scheme

U.S. prosecutors have announced charging eight social media influencers in a securities fraud scheme, alleging that they used platforms like Twitter and Discord to manipulate stocks, which netted them around $114 million.

Pump and dump is a crypto speak-for scheme that usually happens when creators, collaborators and conspirators use misleading information to spike the price of a crypto asset. When the asset's price surges, these people sell their holdings at a profit.

According to the SEC, this is what the eight so-called influencers did to earn more than $100 million.

In a press release, the regulator said that since January 2020, seven of the charged individuals promoted themselves as successful traders to their hundreds of thousands of social media followers.

When the price of the crypto asset these individuals were "shilling" or promoting surged, they used to shed their positions or sell the asset.

"As our complaint states, the defendants used social media to amass a large following of novice investors and then took advantage of their followers by repeatedly feeding them a steady diet of misinformation, which resulted in fraudulent profits of approximately $100 million," SEC Enforcement Division's Market Abuse Unit chief Joseph Sansone said.

"Today's action exposes the true motivation of these alleged fraudsters and serves as another warning that investors should be wary of unsolicited advice they encounter online," he added.

The defendants were Perry Matlock, who uses the Twitter handle @PJ_Matlock; Edward Constantin with the Twitter handle @MrZackMorris; Thomas Cooperman with the Twitter handle @ohheytommy; Gary Deel with the Twitter handle @notoriousalerts; Mitchell Hennessey with the Twitter handle @Hugh_Henne; Stefan Hrvatin with the Twitter handle @LadeBackk; and John Rybarczyk with the Twitter handle @Ultra_Calls.

Aside from those, the eighth defendant, Daniel Knight, with the Twitter handle @DipDiety, was charged with aiding and abetting the alleged scheme by co-hosting a podcast where he promoted individuals and introduced them as expert traders and provided a platform for their "manipulative statements."

The SEC's complaint seeks the U.S. District Court for the Southern District of Texas to impose fines on these defendants. The regulator also wanted the court to order the defendants to give up their alleged ill-gotten gains and a ban on future misconduct.

"Securities fraud victimizes innocent investors and undermines the integrity of our public markets," Justice Department's Criminal Division Assistant Attorney General Kenneth Polite said.

Among those charged, Matlock was arrested Tuesday and pleaded guilty, a court filing showed.