Short seller Andrew Left of Citron charged with fraud by prosecutors, SEC

Andrew
Left,
founder
and
CEO
of
Citron
Research

Adam
Jeffery
|
CNBC

Federal
prosecutors
have
criminally
charged
the
activist

short
seller
and
analyst

Andrew
Left
with
securities
fraud
related
to
allegedly
using
his
public
platform
to
illegally
profit
to
the
tune
of
at
least
$16
million
from
manipulating

stock
market
activity
contrary
to
positions
he
presented
to
the
public
from
2018
through
2023.

Left,
a
54-year-old
Florida
resident
who
has
been
a
frequent
guest
commentator
on
CNBC
and
other
business
cable
news
channels,
and
his
hedge
fund
Citron
Capital
also
were
separately
charged
in
a
related
civil
fraud
action
by
the

Securities
and
Exchange
Commission.

That

civil
complaint
in
Los
Angeles
federal
court
accused
Left
and
Citron
of
“engaging
in
a
$20
million
multi-year
scheme
to
defraud
followers
by
publishing
false
and
misleading
statements
regarding
his
supposed
stock
trading
recommendations.”

The
action
alleges
fraudulent
conduct
relating
to
23
companies
on
at
least
26
separate
occasions.

“Left
bragged
to
colleagues
that
some
of
these
statements
[he
made]
were
especially
effective
at
inducing
retail
investors
to
trade
based
on
his
recommendations
and
said
that
it
was
like
taking
‘candy
from
a
baby,'”
the
SEC
alleged
in
that
complaint.

The
companies
identified
in
the

criminal
indictment
as
ones
Left
allegedly
traded
on
in
ways
contrary
to
his
public
stances
on
their
stock
prices
included

Nvidia,

Tesla,
the
social
media
company
X,
formerly
known
as
Twitter,

Meta,

Roku,

Beyond
Meat,

American
Airlines,

Palantir,
XL
Fleet,

Invitae,

General
Electric,
Namaste
Technologies,
and
India
Globalization
Capital.

The
indictment
alleges
that,
among
other
things,
“Left
coordinated
with
hedge
funds
to
disseminate
short
reports
and
information
to
be
posted
on
Twitter,
coordinated
with
hedge
funds
regarding
the
timing
of
publication,
and
enabled
the
hedge
funds
to
trade
in
the
Targeted
Securities
before
the
reports
were
disseminated.”

“In
exchange
for
sharing
his
planned
announcements
with
the
hedge
funds
in
advance
of
posting
them
publicly,
the
hedge
funds
paid
defendant
Left
a
portion
of
their
trading
profits,”
the
indictment
says.

Download
the
indictment.

Left,
who
lives
in
Boca
Raton,
is
expected
to
be
arraigned
in
the
next
several
weeks
in
Los
Angeles
federal
court
on
the
19-count
criminal
indictment,
the
U.S.
attorney’s
office
in
L.A.
said
in
a
statement.

He
declined
to
comment
on
the
indictment
and
the
SEC
complaint
when
contacted
by
CNBC.

Left’s
lawyer,
James
Spertus,
in
a
statement,
said,
“Mr.
Left
is
a
publisher
who
has
taken
extraordinary
steps
to
comply
with
all
laws,
and
neither
the
[Department
of
Justice]
nor
the
SEC
allege
that
he
ever
once
published
information
he
believed
was
not
true
when
published.”

“Instead,
the
DOJ
and
SEC
allege
that
Mr.
Left
had
a
duty
to
disclose
his
private
trading
intentions
when
publishing
truthful
information,
which
is
a
defective
theory
for
many
reasons,
including
the
fact
that
Mr.
Left’s
publications
contain
detailed
disclosures
written
by
sophisticated
attorneys
informing
readers
that
Mr.
Left
is
trading
in
the
securities
he
writes
about,”
Spertus
said.

The
attorney
also
said
the
indictment
and
complaint
threaten
“the
integrity
of
the
securities
markets
and
put
the
health
of
our
financial
system
at
risk
by
trying
to
silence
a
publisher
of
truthful
information
who
also
trades
in
the
securities
he
writes
about.”

“The
allegations
filed
today
should
concern
all
investors
because
the
publication
of
truthful
information
is
critical
to
efficient
markets,”
Spertus
said.

Akil
Davis,
the
assistant
director
in
charge
of
the
FBI’s
Los
Angeles
Field
Office,
in
a
statement,
said,
“Mr.
Left’s
presence
on
financial
television
networks
and
his
significant
online
following
provided
him
with
a
credible
platform
to
allegedly
disguise
his
intentions
and
manipulate
the
investing
public
for
personal
gain.”

The
indictment
says
that
Left
used
Citron’s
online
platform
to
comment
on
publicly
traded
companies
and
claim
that
their
stock
was
incorrectly
valued
by
the
market,
either
too
high
or
too
low.

“Left’s
recommendations
often
included
an
explicit
or
implicit
representation
about
Citron’s
trading
position
and
a
‘target
price,’
which
defendant
Left
represented
as
his
own
view
of
the
Targeted
Security’s
true
value,”
the
indictment
says.

“Left
knew
that
his
recommendations
influenced
investors’
decisions
to
buy
or
sell
stock
and
thereby
empowered
him
to
manipulate
the
price
of
a
Targeted
Security,”
the
indictment
said.

“By
using
the
Citron
Twitter
Account
to
generate
‘catalysts’
—
events
with
the
ability
to
move
stock
prices
—
defendant
Left
profited
from
his
advance
knowledge
that
he
was
about
to
trigger
such
movements
in
the
market.”

After
using
his
influence
to
manipulate
a
stock’s
price,
Left
“closed
his
positions
to
capitalize
on
the
temporary
price
movement
caused
by
his
public
statements,”
the
indictment
alleges.

The
indictment
and
SEC
complaint
give
specific
examples
of
Left’s
alleged
manipulation,
and
exploitation
of
his
contacts
with
business
media
outlets,
including
CNBC.

The
SEC
complaint
says
that
in
May
2019,
Left
and
Citron
Capital
had
a
short
exposure
in
Beyond
Meat,
which
meant
they
would
profit
if
its
stock
price
dropped.

Left’s
other
company,
Citron
Research,
on
May
17,
2019,
issued
a
negative
tweet
on
Beyond
Meat,
which
recommended
that
readers
sell
the
stock
and
assign
it
a
target
price
of
$65
per
share,
at
a
time
when
the
stock
was
selling
at
about
$87
per
share.

“$BYND
has
become
Beyond
Stupid”
and
“We
expect
$BYND
to
go
back
to
$65
on
earnings,”
that
tweet
said.
“Despite
his
negative
statements
to
the
market,
only
10
days
before
Left
told
a
colleague
that
he
thought
the
price
of
BYND
would
increase,
stating
“i
think
BYND
goes
to
100,'”
the
SEC
said
in
its
complaint.

Within
seven
minutes
of
the
tweet,
Left
exited
the
majority
of
his
short
exposure
to
Beyond
Meat,
and
Citron
Research
“completely
covered
its
short
positions
within
12
minutes
of
the
tweet,”
the
complaint
said.

“Later
that
day,
in
advance
of
an
article
CNBC
planned
to
release,
a
reporter
emailed
Left
asking
whether
he
still
held
a
trading
position
in
BYND.
In
response,
Left
stated
that
he
‘shorted
some
today,'”
the
complaint
says.

“This
statement
was
materially
false
and
misleading
because
Left
had
exited
the
majority
of
his
short
exposure
and
Citron
Capital
had
already
sold
all
of
its
short
exposure,”
the
complaint
alleges.
“Six
minutes
after
this
email
exchange,
Citron
took
additional
short
exposure
in
BYND,
before
the
release
of
the
CNBC
article.”

“Within
an
hour,

CNBC
published
an
article
titled
‘Short
seller
says
Beyond
Meat
hype
is
‘beyond
stupid,’
places
bet
against
the
shares,'”
the
complaint
says.
“After
the
article
was
released,
Citron
exited
this
additional
short
exposure.”

Left,
who
previously
lived
in
Beverly
Hills,
California,
is
charged
in
the
indictment
with
one
count
of
engaging
in
a
securities
fraud
scheme,
17
counts
of
securities
fraud
and
one
count
of
making
false
statements
to
federal
investigators.