greetings everyone welcome to the plane Bagel. I'm your host Richard coffin. Two months ago, we put out a video on this channel about what constitutes Market manipulation. At the time, there had been a lot of discussion around Keith Gil, also known as roaring Kitty, or the big personality behind the GameStop mem stock movement, and whether he was using his online influence to manipulate the stock price. The video sort of ending on the note of unless there's further Evidence brought forward here, there's not much of a case for Market manipulation. Well, now we have allegations of actual Market manipulation, and once you know it, it's not Keith Gill on the hook for this, but rather a short seller. And not just any short seller, but Andrew left of Citron research. If you might know, he is a prominent investor who is actively speaking out against Keith Gill, releasing a number of tweets, showing up for interviews, and even at one point being brought on air to comment and watch the live stream of roaring Kitty's.

return with Andrew ultimately arguing that Keith kill was misusing his influence to manipulate the stock price, and even going so far as to suggest that he had maybe been receiving payments or was otherwise backed by big money. But in an ironic twist of the story, uh, Andrew himself has now been charged with both an SEC civil case as well as a criminal indictment where he faces up to 25 years in prison for market manipulation. The case is arguing that not only did Andrew left make false statements to try and manipulate stock prices, but that he himself was being paid by hedge funds for some of his coverage, something that he actively tried to hide. And as you would expect with Andre left having previously been short on GameStop and having criticized Keith Gill and the meme stock movement for their impact on stocks, some in the meme stock movement have been having quite the field day with this news. But I want to cover this story today because a it's a good follow-up to the first story, especially given that if we're going to talk about possible

Market manipulation. We should talk about the actual allegations that occurred, but also, it's just a really ridiculous case altogether. I've personally been pretty critical of the mem stock rally and the hype and promise around it, but holy Toole, Andrew really didn't do himself or short sellers any favors here. He really did put himself out there as the archetypical mem stock Billa, with him allegedly saying things like these retail holders are nervous, we will hit them candy from a baby when talking about how easy it is to make money from retail traders. We can destroy Kraw in reference to a specific ticker, and when talking about a Canadian stock that he was trying to manipulate, saying, Canadians so gullible, very, which, what the hell, man? So for today's video, I've read through both the SEC civil case and the indictment so that you don't have to, and I'll highlight the main points and what's being alleged here. But before hopping into that, let's start with some context around who Andrew left is if you haven't heard of

him before he's the main guy behind Citron research and by extension Citron Capital. With the former putting itself out there as an independent Securities uh research publisher, meaning that they provide recommendations on publicly traded stocks, and the latter being essentially a hedge fund where money was actually being managed. And through Citron research, Andre left is known for making pretty fiery and aggressive short seller reports and uh recommendations on different socks uh using language like uninvestable, all hype, and even calling Twitter at one point the Harvey Weinstein of social media. And this type of language and seeming conviction seemed to earn him quite the reputation with the making many appearances on CNBC, Fox Business, and Bloomberg TV. Now what's interesting about short sellers like Andre left is that they often had this reputation of releasing these sort of bombshell reports where they make tall allegations against a publicly traded company. And at times these can be incredibly useful, such as with hindenburg's research on Nicola Motors where they effectively revealed that the company was faking its EV Technologies.

but because of the large impact, these sort of bombshell reports can have on the stock price, and because the short seller looks to benefit from the stock price falling, we do have a history of short sellers who have uh abused their market presence and otherwise campaigned to try and spread the information that a stock was headed toward zero. Now according to the cases, this isn't actually the first time Andrew has run into trouble. Uh back in 1998, he was actually sanctioned by the National Futures Association for making false and misleading statements to customers, and in 2016, he was barred by the Hong Kong Futures and Securities Commission for 5 years, albeit with the latter in his defense that was seemingly just because he had posted warnings about the Chinese company Evergrande, uh which was seemingly justified. Now Andrew sort of became tied with the meme movement back in 2021 by shorting and sharing his negative thesis about GameStop during the time of the initial rally, with him exiting the position in late January that year at a

sizable loss. And as mentioned, he's recently been back in the news cycle for publicly criticizing Keith Gill on his return, with him arguing in a number of tweets that Keith was misusing his influence. They likely didn't even believe in the positive thesis around GameStop, and even going so far as to suggest that he was likely being backed by a larger investor, given the size of Keith Gill's investments, which, as it would turn out, he allegedly had a bit of familiarity with because on July 26th, the SEC, the fraud section of the Department of Justice, and the US attorney's office for the central district of California announced their cases against Andrew Left, with the criminal indictment being for one count of engaging in a securities fraud scheme, 17 counts of securities fraud, and one count of making false statements to federal investigators, with a civil case and criminal indictment both being shared online. Now, the two cases largely cover the same details OB, yet the SEC case does include a larger list of allegedly manipulated securities.

what did the case is alleged Andrew left did here while they actually relate to some older activities that allegedly took place between March 2018 and December 2020. With the SEC case accusing Andrew of publishing false and misleading statements in at least 26 occasions involving 23 different companies leading to profits of at least $20 million. With the indictment meanwhile referencing a slightly different timeline involving 17 different Securities and entailing profits of at least $16 million. Now even though Andrew left does have a track record of using really strong language even going so far as to suggest that some Securities were carrying out Securities fraud. The false statements being alleged here don't have to do with the actual companies being traded but rather Andrew left's own positions and trading activity. You see Andrew left would allegedly take a position in a company release a corresponding positive or negative thesis on the stock only to then exit the position and trade against his recommendation at times within minutes of releasing the report or the Tweet. Uh with the case arguing that

companies saw an average movement of over 12%. Send as a result of Andrew's posts. In other words, Andrew left is being accused of a good old-fashioned pump and dump. Or in the case of Short Selling, a poop and scoop because you poop on the position and then scoop it up. Now part of the alleged scheme here is that Andrew left would use really aggressive Target prices. If you aren't familiar, when an analyst releases a recommendation or a stock pick, they usually include a price Target or Target price, which is basically what they believe the stock is actually worth than what it should be trading towards. In Andrew Le's case, he would choose Target prices that were either well above or well below the current stock price to sort of communicate this extreme conviction that the stock was highly undervalued or overvalued and that there was going to be this big correction. When in actuality, these Target prices were seemingly arbitrary, not really based on any sort of calculation. And Andrew left would

allegedly exit his positions well before the stock price even got close to the Target price. He had put out there in one example on the same day that Andrew left released a positive report in a tweet on ticker nvta with a $100 Target price and indicated that he would quote stay long until the talk hits at least $65. Andrew sold the position again after just sharing the recommendation for a price between 27 and $28 with Andrew seemingly rinsing and repeating the strategy many times of publishing an aggressive Target price only to trade against that recommendation again at times within minutes. With Andrew even allegedly entering limit orders which you can think of as a preemptive order to buy or sell a stock once it reaches an indicated price again well off of his Target prices even before releasing his recommendations but that's not the only misrepresentation being argued in these cases. In addition to the pump and dump scheme, the case alleges that Andrew left would later make either false or half-truth statements about his past.

trading activities on these positions to try and obscure the fact that he was trading off of his own influence. For example, after issuing a short publication on Kronos and causing the price to drop, Andrew left went for a live interview on CNBC where he was asked whether he was still short the position, with him saying the following, I took a small size of the position off today, yeah, but I'm still, I'm still extremely short this stock, this despite the fact that he had already exited 75% of his position by the time of the interview at a price well above his listed Target price. Now, so far you're probably thinking to yourself, Wow, that's all pretty shady. Well, buckle up, because that's not the end of it. It turns out Andrew left also allegedly lied about Citron research being independent. You see, it turns out Andrew left has a weird habit of calling other people out for stuff that he's allegedly doing himself, and it's not just with Keith Gill. Back in 2019, Andrew

publicly criticized another research publisher for disclosing that they had taken payment to release a short report on General Electric, indicating that, No credible hedge fund or short seller would ever do this, with him also saying that, In 18 years of publishing, we have never been compensated by a third party to publish research. Well, survey says that was a lie, allegedly, because according to the case, Andrew had in fact received payment from money managers on several occasions, including in one case from a firm, Anson advisers, who offered to pay him to post a short report on cannabis company Namaste, with Andrew allegedly responding, Done, let me kill it, and proceeding to not only publish a negative report and tweets on the stock that this hedge fund had an interest in seeing its price go down, but even making an anonymous website called namastaytruth.com to try and bolster his claim and give the impression that many others believe this company was a fraud. And because Andrew Left was clearly aware that these payments would hurt his reputation, he

allegedly routed these payments through a third party to try and cover up the fact that he had been paid for his coverage. So you can see that Andrew's been seemingly caught in a lot of lies here, but just to add insult to injury, uh, the SEC case even alleges that Andrew lied about the fact that he had investors because it turns out that the Citron fund is entirely Andrew's own money. This, despite the fact that the SEC case alleges that Andrew held the fund out as a fund with external investors, referring to my investors and our investors regularly, releasing investor letters, which is something funds typically publish for those invested in their funds, and even referencing the fund's offering memorandum, which is a legal document much like a stock prospectus, which in many cases is required for external investors to be able to invest in certain funds. Now, to be sure, Andrew ly a little bit on his resume, probably the least problematic aspect of this case, especially given that at least as early as 2018, his site did indicate that he was a private

investor, but it's another detail that's being put forth as evidence that Andrew was trying to enhance his impact on the market by seemingly bolstering his credentials. And just with all the other lies involved, just to cherry on top of the other case details. So yeah, pretty ridiculous case all around. Not only were there allegedly lies around Andre Le's recommendations, his own trading activity into his PHS, but also the fact that he was independent despite actually taking payments from hedge funds in some cases. And the fact that he had investors, which is really ironic when again you consider how far Andrew left went out of his way to comment against people doing the exact things that he's being accused of doing here. And the case is just full of pretty damning quotes, including messages where he's making fun of retail investors and even bragging to his colleagues and partners about the type of influence he has over stock prices. And there are a lot of other examples of quotes and other stocks that he allegedly manipulated in the case.

I'll leave links to both of them in the description down below. So far, it appears Andrew Left is planning to fight these charges. As mentioned, he's pled not guilty, and his lawyer has argued that the case is, quote, based on a defective theory, and that because Andrew Left was actually a private investor, he never owed any duty around his disclosures. Now, certainly, we can all probably agree that unless these actions or quotes were taken grossly out of context, that a lot of what we discuss today is pretty dishonest, if not even unbecoming. But is it illegal market manipulation? Well, while the regulators certainly seem to think so in this case, it's not actually all that evident whether this is a slam dunk case against Andrew Left. You see, there are certainly issues with how Andrew Left made his disclosures, and possibly even the timing of his decisions and activities versus the recommendations he was providing. It's no question that the alleged acts are shady and scummy, but specifically when talking about market manipulation, he isn't accused of spreading false information.

about the companies that he was covering. In fact, as highlighted by Matt LaVine over at Bloomberg, one analysis of 111 Citron short sale reports published from 2001 to 2014 found that Andrew was often correct in identifying falling companies, with the stock seen an average share price decline of 42% a year after Citron's publication. So, likely after the influence he would have had over the stock price. So, while it's certainly not to suggest that Andrew LIF is in the clear with all this and might still be liable for some activities here, if he can argue that he believed in the recommendations he was providing, even if he did do some shady timing with his transactions, then there might be a valid defense there. Take Kronos, for example. Despite the shady activity around Andrew's recommendation with the company, the business did end up being charged by the SEC for fraud and is actually trading below Andrew's initial target price. And while you might find his actions egregious, it certainly wouldn't be the first seemingly clear pump and

dump scheme to get off the hook. For example, you might remember a while back that eight influencers got in trouble for carrying out a seeming pump and dump by promoting stocks that they were simultaneously exiting to their followers. Well, we recently got the update around that case was actually dropped with the judge arguing that influencers not disclosing when they intend to sell the positions they're promoting didn't line up with the prosecutor's claim of Securities fraud. Now, mind you, this ruling was from a Texas judge and is being appealed, with many legal experts believing it follows a flawed line of reasoning. But it all hopefully goes to show that it's not clear-cut whether we'll see a conviction here, especially given that with companies like Kronos, it's not all that evident that investors could claim any damages, given that the company did end up seeing poor performance and falling further in price. And of course, everything we've covered so far is from the prosecution. We have yet to see what the defense's arguments will be. So, Andrew left is innocent until proven

guilty, and we'll have to wait and see how things play out. Nonetheless, this is not to justify Andrew left's actions, and hopefully it demonstrates why you have to take any sort of stock pick, whether it be from a TikTok account or CNBC, with a grain of salt. The people who go out there to convince individuals to buy certain positions do have their own motivations you have to consider and will stand to benefit by you buying in or otherwise selling the positions that they have exposure to. Now with all this, I know some people will highlight this as a clear example of the conspiracy that hedge funds control mainstream media and give them the spotlight to offload their positions onto retail investors. There you do have to keep in mind, however, that media companies do themselves have an interest in hosting people who are willing to make tall and extreme claims as it gets more attention so you really can't take any sort of stock pick at face value even from someone who presents themselves as a professional. Yes, there's this air of

expertise, but you have to consider the person's motivations. Anyway, that's it for today. Thank you for joining me. If you like this video, please do make sure to like, subscribe, all that good stuff. It does help the channel tremendously. And let me know your thoughts on this case down below. Like I mentioned, pretty ridiculous details, which is why I wanted to cover it. Uh, definitely not the Canadian comment. Anyway, thanks again for joining me. And as always, be safe out there.

Prominent Short Seller Charged With Market Manipulation

Investing and personal finance educational videos with a hint of economics, posted regularly.

I'm a CFA and CFP professional working as an analyst for an investment management company in Ottawa. I'm a huge finance nerd and am passionate about the field - I think people lack the resources they need to make educated financial decisions, and hopefully this channel helps with that!

For collaboration/other inquiries: richard@theplainbagel.com

For sponsorships:
sponsorships@theplainbagel.com

DISCLAIMER:
The videos on this channel are for education purposes only and do not constitute financial advice. Richard Coffin does not provide recommendations on The Plain Bagel - those looking for investment advice should seek out a registered professional. Richard is not responsible for investment actions taken by viewers and his content should not be used as a basis for investment trades.