DOJ and SEC Charge Social Media Influencers with "Pump and Dump" Scheme

The DOJ and the SEC charged eight individuals with conspiracy to commit securities fraud for using their influence on social media platforms to manipulate exchange-traded stocks.

In the criminal Indictment, filed in the Southern District of Texas, the DOJ alleged that the individuals made "false and misleading" statements on Twitter and other social media platforms in order to promote certain securities and artificially inflate prices. The DOJ alleges that the individuals later sold their shares in the securities at the artificially high prices for a profit totaling approximately $114 million. If convicted, each individual faces a maximum penalty of 25 years in prison for conspiracy to commit securities fraud and related counts of securities fraud. One individual may also receive an additional 10-year sentence if convicted of engaging in unlawful monetary transactions.

In the civil Complaint, filed in the Southern District of Texas, the SEC alleged that the defendants provided a "steady diet of misinformation" to their collective 1.5 million social media followers, including promoting themselves as successful investors and promoting price targets and buy recommendations. The SEC also alleged that the individuals did not disclose to their followers when they planned to sell their shares in a particular security. The SEC seeks permanent injunctions, disgorgement, prejudgment interest and civil penalties against each defendant, as well as a penny stock bar against one of the defendants.

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