U.S. prosecutors are going after eight social media influencers in a so-called “pump and dump” scheme. The men are accused of earning $114 million by using Twitter, Discord, and a podcast to manipulate stocks.
How did eight average guys use a simple social media profile to steal millions from their followers? First, the influencers portrayed themselves as successful traders or a “FinTwit,” a Twitter financial guru. The SEC is now charging 7 of them with fraud. The eighth influencer hosts a popular podcast and is charged with “aiding and abetting” the “pump and dump” scheme. In a press release, the SEC explained how the scheme works. First, they purchased the stock. They then encouraged their followers to buy those same stocks by posting price targets or indicating they were buying, holding, or adding to their stock positions. When those share prices or trading volumes rose, the group would sell their shares without disclosing plans to dump the securities.
Prosecutors say the influencers did post disclaimers on their page; however, they intended for followers to act after seeing their promotional tweets.
The individuals charged were Texas residents Edward Constantinescu, Perry Matlock, John Rybarczyk, and Dan Knight, along with California residents Gary Deel and Tom Cooperman, Stefan Hrvatin of Miami, and Mitchell Hennessey of Hoboken, NJ.
It’s a lesson learned for influencers and anyone searching for knowledge on trading. First, stop making yourself vulnerable to online schemes. It might not be the brightest idea to receive information about your money from influencers with no finance background. For influencers, you should be more mindful of what advice you promote on social media. Posting a disclaimer does not protect you from legal action.
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