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Yesterday a federal jury in Los Angeles convicted an activist short seller of securities fraud for a long-running market manipulation scheme reaping profits of more than $21 million.
“Andrew Left used his expertise to profit at the expense of retail investors, ordinary people who owned the stocks he targeted. He callously boasted that it was like ‘taking candy from a baby,’” said Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division. “Egregious schemes like this strike at the heart of free, fair and open markets, and warrant prosecution when they involve criminal manipulation. Investors should have confidence that U.S. markets are safe and free from the type of deliberate manipulation that Left engaged in to enrich himself at the expense of American investors.”
“Left used his TV appearances to disguise his intentions, manipulate the stock market, and pad his pockets,” said First Assistant U.S. Attorney Bill Essayli for the Central District of California. “A fair and transparent securities market is a foundation of our nation’s financial system. We will continue to bring to justice individuals who abuse the public trust placed in financial advisors.”
“Andrew Left abused his position and influence when he devised a scheme known as ‘Short-and-Distort,’ to manipulate the market for personal gain,” said Inspector in Charge Eric Shen of the U.S. Postal Inspection Service (USPIS). “Now he’s facing the consequences. Postal inspectors and our federal counterparts continue to partner to ensure spreading misleading or false material to the investing public has only one result: jail time.”
“Frauds such as the one perpetrated by Left can erode investor confidence which impacts our capital markets,” said Assistant Director in Charge Patrick Grandy of the FBI Los Angeles Field Office. “While this conviction cannot make up for the significant and emotional harm he inflicted upon his unwitting investors, it does send a message to those who may be looking to profit from similar schemes – think twice because the FBI has a proven track record of rooting out fraudsters who illegally tilt the playing field against honest investors and undermine confidence in our markets.”
According to court documents and evidence presented at trial, Andrew Left, 55, of Boca Raton, Florida, was a securities analyst, trader, and frequent guest commentator on cable news channels who manipulated the price of publicly traded securities so that he could profit off of investors who trusted him. As part of his scheme, Left made false and misleading statements — in the form of online posts and public reports — concerning publicly traded companies, asserting that the market incorrectly valued a company’s stock and advocating that the current price was too high or too low. Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money.
In anticipation of his public commentary, Left established long or short positions in the public company on which he was commenting and prepared to quickly close those positions post-publication and take profits on the short-term price movement caused by his commentary. In advance of his tweets and reports, Left would enter limit orders to trade in the opposite direction of his public recommendations. Furthermore, Left used his advance knowledge and control over the timing of a market-moving event to build his positions using inexpensive, short-dated options contracts that expired from the same day that he published his commentary to within five days. To further the scheme, Left advanced the false pretense that his investment recommendations were credible because he was independent and free from any financial conflicts of interest.
Left was convicted of one count of participating in a securities fraud scheme and 12 counts of securities fraud. He is scheduled to be sentenced on Aug. 31. He faces a maximum penalty of 25 years in prison. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.
USPIS and the FBI investigated the case. The Justice Department appreciates the substantial assistance of the Financial Industry Regulatory Authority (FINRA)’s Criminal Prosecution Assistance Group.
Acting Assistant Chief Matthew Reilly of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Benedetto L. Balding and Andrew Roach for the Central District of California are prosecuting the case. Paralegals Mika Gothard, Ellen Kiernan, and Lanie Kirby provided substantial assistance.
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