Jury Convicts Short Seller for Stock Price Manipulation

A federal jury convicted an activist short seller of securities fraud and market manipulation in a "Short-and-Distort" scheme. 

In a criminal case brought before the U.S. District Court for the Central District of California, the jury found that the defendant, a securities analyst, trader, and frequent cable news commentator, made false and misleading statements in online posts and public reports about publicly traded companies, claiming the market had mispriced their stock. The Department of Justice said he targeted stocks popular with retail investors, built long or short positions in the targeted companies and entered limit orders to trade in the opposite direction of his public recommendations.

DOJ alleged that the defendant used inexpensive, short-dated options contracts, some expiring the same day that he published his commentary, to profit from the short-term price swings his commentary caused, and then quickly closed the positions in a scheme referred to as "short-and-distort." 

The jury returned the verdict finding the defendant guilty of one count of participating in a securities fraud scheme and 12 counts of securities fraud.