Jury convicts short seller in $21 million stock manipulation scheme

A federal jury in Los Angeles convicted activist short seller Andrew Left on securities fraud charges, finding him guilty of running a long-running market manipulation scheme that reaped more than $21 million in profits, according to the Justice Department.

Left, 55, of Boca Raton, Florida, was convicted of one count of participating in a securities fraud scheme and 12 counts of securities fraud. He faces a maximum penalty of 25 years in prison and is scheduled to be sentenced Aug. 31. A federal judge will determine any sentence after considering federal sentencing guidelines and other statutory factors.

A securities analyst, trader and frequent cable news commentator, Left carried out what prosecutors described as a “Short-and-Distort” scheme. According to court documents and evidence presented at trial, Left published false and misleading reports and social media posts about publicly traded companies, claiming stocks were overvalued or undervalued, while holding positions intended to profit from the short-term price movements that followed his commentary.

Before publishing his commentary, Left established long or short positions in targeted companies and entered limit orders to trade in the opposite direction of his public recommendations. Prosecutors said he also used inexpensive, short-dated options contracts that expired the same day or within five days of publishing his commentary, exploiting his advance knowledge and control over market-moving events. Left further deceived investors by claiming his recommendations were independent and free from financial conflicts of interest, prosecutors said.

“Andrew Left used his expertise to profit at the expense of retail investors, ordinary people who owned the stocks he targeted,” said Assistant Attorney General A. Tysen Duva of the Justice Department’s Criminal Division, adding that Left boasted the scheme was like “taking candy from a baby.”

First Assistant U.S. Attorney Bill Essayli for the Central District of California said Left “used his TV appearances to disguise his intentions, manipulate the stock market, and pad his pockets.”

Inspector in Charge Eric Shen of the U.S. Postal Inspection Service said Left abused his influence through a “Short-and-Distort” scheme to manipulate the market for personal gain and warned that spreading false or misleading information to investors can lead to criminal prosecution.

FBI Assistant Director in Charge Patrick Grandy of the Los Angeles Field Office said the fraud “can erode investor confidence which impacts our capital markets,” and warned that the bureau has a track record of “rooting out fraudsters who illegally tilt the playing field against honest investors.”