Federal prosecutors and securities regulators filed criminal and civil fraud charges against a well-known investor who frequently appeared on cable TV business shows to discuss his often bearish views on stocks, authorities said Friday.
They accused the investor, Andrew Left, of raking in at least $16 million in illegal profits from a multiyear scheme to manipulate market prices of roughly two dozen stocks on which his firm, Citron Research, had published reports. He is charged with illegally profiting through stock trades he made that were contrary to the public recommendations he was making to investors.
Authorities in Los Angeles said Left essentially used a bait-and-switch strategy that was at odds with his Wall Street reputation of being a vocal short seller, with supposedly long-held negative views of the stocks on which he published critical reports.
The charging documents said Left, 54, used his high profile on Wall Street to make quick profits from big price changes in a stock and misled investors by making them believe his economic interests were aligned with what he said in his reports.
Short sellers seek to profit from the decline in a stock’s price. Many prefer not to be so public with their views. But Left was one of the first of a new breed of short sellers to aggressively promote his bearish opinions. A 2017 profile on Left in The New York Times Magazine compared him to a journalist smoking out corporate fraud.
Authorities said Left would give the public a false impression, through his research reports, social media and TV appearances, that he had long-term negative positions on a stock when he was really seeking to quickly profit from a sharp decline in it. They also accused him of sometimes quickly selling a stock after publishing a positive report on it.
James Spertus, a lawyer for Left, said the charges against his client “threaten the integrity of the securities markets” because federal authorities are not claiming that Left published false information about any stocks.
“The fact that Mr. Left trades in the securities he researches and writes about is well known to everyone, and there is no rule or law requiring a publisher who discloses that he is trading to also publish his private trading intentions.”
Kate Zoladz, director of the Securities and Exchange Commission’s regional office in Los Angeles, said in a news release that Left took advantage of the trust that his followers on Wall Street had in him and would encourage them to “trade on false pretenses so that he could quickly reverse direction and profit from the price moves following his reports.”
The criminal and civil charges against Left stem from a more than two-year investigation that had taken a broad look at other so-called activist short sellers — investors who publish critical research reports on stocks.
Federal prosecutors in Los Angeles did not file charges against any other short sellers.
But in the indictment filed against Left, authorities said he had provided some hedge funds with advance notice of his reports so those firms could make trades in anticipation of a stock moving on the release of a report. The indictment said Left was provided compensation by at least one hedge fund.
Authorities said Left misled investors by stating his reports were the results of his own independent research and were not shared with any other investors before publication.
The indictment did not identify any hedge funds that might have coordinated their efforts with Left. But in the SEC’s civil complaint, regulators said Left had received compensation from Anson Funds, a Dallas-based hedge fund, in connection with critical reports on two stocks.
In June, the SEC reached a civil settlement with Anson over charges that it had made misleading disclosures about its work with unnamed activist short-selling firms. A representative for Anson declined to comment.
Left, whose firm was based in Beverly Hills, California, but who now lives in Boca Raton, Florida, is expected to be arraigned on the criminal charges in the next few weeks, said a spokesperson for Martin Estrada, U.S. attorney for the Central District of California in Los Angeles.
In all, Left is charged with 17 counts of securities fraud and one count of making false statements to federal investigators. If convicted, he could be sentenced to 25 years or more in a federal prison.
This is not the first time Left has run afoul of authorities. In 2015, he was barred from trading in Hong Kong after securities regulators there took issue with one of Citron’s reports.
c.2024 The New York Times Company. This article originally appeared in The New York Times.
