SEC charges Andrew Left and Citron Capital for fraud scheme

The U.S. Securities and Exchange Commission has announced charges against activist short seller Andrew Left and his firm, Citron Capital LLC, for engaging in a $20 million multi-year scheme to defraud followers by publishing false and misleading statements regarding his supposed stock trading recommendations.

The SEC’s complaint alleges that Left, who resides in Boca Raton, Fl., used his Citron Research website and related social media platforms on at least 26 occasions to publicly recommend taking long or short positions in 23 companies and held out the positions as consistent with his own and Citron Capital’s positions. The complaint alleges that following Left’s recommendations, the price of the target stocks moved more than 12 percent on average. According to the SEC’s complaint, once the recommendations were issued and the stocks moved, Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements. As a consequence, Left bought back stock immediately after telling his readers to sell, and he sold stock immediately after telling his readers to buy.

The complaint alleges that Left and Citron Capital made several false and misleading statements in connection with the scheme. For example, it alleges that defendants told the market that they would stay long on a target stock until the price hit $65 when, in fact, they immediately began selling the stock at $28. It further alleges that they falsely represented to the market that Citron Research was an independent research outlet that had never received compensation from third parties to publish information about target companies when, in fact, the defendants had entered into compensation arrangements with hedge funds.

Among other remedies, the complaint seeks disgorgement, prejudgment interest, and civil monetary penalties against Left and Citron and conduct-based injunctions, an officer-and-director bar, and a penny stock bar against Left.