SEC: Social Media Influencers on the Hook for $100M Stock Manipulation Scheme

According to a lawsuit filed in federal court in Texas on Tuesday, the Securities and Exchange Commission (SEC) has charged eight influencers with manipulation of stocks. Allegedly, the defendants plugged stocks on social media to increase trading volume and price then sold shares without disclosing their plans to dump the securities in violation of anti-fraud provisions.

The civil complaint, filed alongside criminal charges against the defendants from California, Florida, New Jersey, and Texas, asserts that each has hundreds of thousands of followers on Twitter. The filing says that since at least January 2020, seven of the defendants promoted themselves as successful traders and gained notoriety through podcasts, on Twitter, and in stock trading chat rooms on Discord, a VoIP and instant messaging social platform. 

The SEC calls the scheme both long-running and fraudulent, with the defendants publishing false and misleading information like that posted by defendant John Rybarcyzk or @Ultra Calls. In one instance, Rybarcyzk, the founder of Sapphire Trading, a stock trading forum on Discord, posted “If you didn’t bank with the gang today; then idk what’s wrong. Gave this alert on Twitter and Sapphire Trading Discord (1000% FREE).” 

In a statement, Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit summarized that the defendants “took advantage of their followers by repeatedly feeding them a steady diet of misinformation, which resulted in fraudulent profits of approximately $100 million.” The official further noted that the enforcement action “serves as another warning that investors should be wary of unsolicited advice they encounter online.”

The civil complaint requests that the court enter permanent injunctions and order disgorgement, prejudgment interest, and civil penalties against each defendant, as well as a penny stock bar against one of them.