8 Social Media Influencers Charged by SEC in $100 Million Stock Manipulation Scheme Using Twitter and Discord, the influencers presented themselves as successful, knowledgeable traders.
The SEC has filed charges against eight influencers for their involvement in a securities fraud scheme worth $100 million. According to the Securities and Exchange Commission, the men used social media platforms such as Discord and Twitter for stock manipulation.
The SEC listed the defendants' names and social media handles in a Wednesday news release. They include Texans Perry Matlock (@PJ_Matlock), Edward Constantin (@MrZackMorris), John Rybarcyzk (@Ultra_Calls), and Daniel Knight (@DipDeity), California residents Thomas Cooperman (@ohheytommy) and Gary Deel (@notoriousalerts), as well as Mitchell Hennessey (@Hugh_Henne) of New Jersey and Floridian Stefan Hrvatin (@LadeBackk).
Seven of the named defendants promoted themselves on various social platforms as successful traders, but the SEC alleges they were engaging in insider trading. They gained hundreds of thousands of followers using Twitter and Discord, buying stocks and then prodding their followers to do the same. According to the SEC, when novice traders purchased stocks, increasing trading volumes and prices, the accused would sell off their shares without informing their followers they'd done so.
The eighth defendant, Daniel Knight, allegedly aided and abetted the hustle through his podcast co-hosted with Mitchell Hennessey, Pennies Going in Raw. Knight promoted the others as experts, giving them what amounted to a megaphone they could use to further their scam. A now-deleted speakers' web page for Knight and Hennessey described Pennies as the "biggest and fastest growing Stock Market podcast." It also said Hennessey was "a self-made millionaire" who "created Hugh Henne with the intention of helping others open Roth IRAs, easily understand the stock market, and to give back to a community that has given so much to him."
In the release, Chief of the SEC Enforcement Division's Market Abuse Unit Joseph Sansone said, "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."
"Today's action exposes the true motivation of these alleged fraudsters," Sansone continued, "and serves as another warning that investors should be wary of unsolicited advice they encounter online."
The 39-page SEC complaint showed how casually such a scheme came together. It also detailed some of the defendants' methods, stating that "sometimes they peddled false or misleading news about particular stocks through social media or podcast interviews," while at other times, the "Primary Defendants lied about losing money on a particular stock when in reality they had profited handsomely, in order to generate trust among their followers..."
The complaint contained telling transcripts of Discord voice chats between some defendants who were unaware they were being recorded. On March 1, 2021, during a discussion about allegedly manipulating securities, Daniel Knight said, "Get caught? We're robbing ... idiots of their money. . ."
In another transcript, the complaint alleged that "Knight acknowledged that he understood the Primary Defendants were engaging in market manipulation, and explained why he posted fewer recommendations on Twitter and Atlas than the Primary Defendants."
"[Playing] stupid does not work in court," Knight said at one point, "it's market manipulation. I mean you look up the definition of market manipulation."
The SEC release indicated that it will seek "permanent injunctions, disgorgement, prejudgment interest, and civil penalties against each defendant, as well as a penny stock bar against Hrvatin." Additionally, the commission filed criminal charges "against all eight individuals...in a parallel action brought by the Department of Justice's Fraud Section and the U.S. Attorney's Office for the Southern District of Texas."
This is an ongoing investigation.