Federal regulators say a group of social influencers carried out a $100 million fraud.
According to the Securities and Exchange Commission (SEC), the eight men are accused of using the social media platforms Twitter and Discord to manipulate exchange-traded stocks in what’s known as a “pump and dump” scheme.
“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,” Joseph Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit, said in a news release Wednesday (Dec. 14).
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“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.”
The SEC alleges the defendants — beginning as early as January 2020 — promoted themselves as successful traders and amassed hundreds of followers on Twitter, and in Discord stock trading chatrooms.
They allegedly purchased stocks and encouraged their followers to buy them stocks by posting price targets or indicating they were buying, holding, or adding to their stock positions.
“However, when share prices and/or trading volumes rose in the promoted securities, the individuals regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them,” the SEC said.
