Maximum sentence of 370 years! SEC accuses "famous short seller" Citron Research and its founder of multiple instances of tweeting before reverse operations, targeting Meta and NVIDIA
Citron Research had shorted multiple Chinese concept stocks. In 2021, it was counterattacked by retail investors in the short battle at GameStop
Three years ago, Andrew Left, who unexpectedly faced a backlash from retail investors after shorting GameStop, has once again found himself in big trouble. The well-known Wall Street short seller was sued by U.S. regulatory authorities on Friday and is facing up to 370 years in prison.
On Friday local time, the U.S. Securities and Exchange Commission (SEC) and the Department of Justice jointly announced that Left and his venture capital firm, Citron Capital, are being sued, accusing them of allegedly making up to $20 million in profits by posting misleading information on social media platforms.
The Department of Justice stated that Left is charged with one count of participating in a securities fraud scheme, 17 counts of securities fraud, and one count of making false statements to federal investigators. According to the statement, if Left is convicted on all charges, he could face a maximum of 370 years in prison.
The SEC filed a separate lawsuit against Left, accusing him and Citron Capital of violating anti-fraud provisions of federal securities laws. If found guilty, the SEC will seek the return of all illegally obtained funds by Left and impose additional, unspecified fines.
The SEC alleges that Left is suspected of using posts on his company and social media platforms to publicly recommend shorting or longing 23 companies (including Roku, Meta, and NVIDIA) at least 26 times. He would then quickly change his position after the stock prices of these companies rose, making illegal profits.
In addition, the Department of Justice also accuses Left of making false statements to the public and law enforcement agencies regarding his relationship with a hedge fund, as well as forging related documents.
Left's lawyer has not yet commented on the matter. Investigations by the SEC and the Department of Justice are ongoing to determine if there are more illegal activities.
Left had previously shorted several Chinese concept stocks and was defeated by retail investors in the GameStop short battle
Left is one of the most famous short sellers on Wall Street, and his Citron Capital is notorious in the stock market.
Citron Capital specializes in finding companies it believes are overvalued or suspected of financial fraud, and uses unusual methods to dig deep. In addition to researching the fundamentals of companies, they would also send people to infiltrate company internals, stake out factory traffic, and use drones for aerial reconnaissance.
Since its establishment, Citron Capital has shorted numerous listed companies, including many Chinese companies such as Evergrande Real Estate, Rongtong Education, and GSX Techedu. Many of these companies that were shorted ended up in dismal situations, with stock prices plummeting or even being forced to delist.
However, Citron Capital's shorting journey has not been smooth sailing. In 2012, Left made a major mistake in a report on Qihoo 360 and Sohu, damaging Citron's research reputation. In 2016, the Hong Kong Market Misconduct Tribunal imposed severe penalties on Left, including a 5-year trading ban and requiring him to repay trading profits and legal fees.
In January 2021, Citron Capital faced its biggest setback in the GameStop short battle.
Under the pressure from retail investors to squeeze the shorts at GameStop, Citron Capital had to surrender, with Left eventually closing out with a 100% loss and announcing that they would no longer publish short reports, focusing instead on long strategies. This event was seen as a historic defeat for Wall Street short-selling institutions.**However, earlier this year, Leifert established a new short interest position at GameStop