Court Dismisses Pump and Dump Indictments Against Seven Social Media Influencers

Securities Fraud Charges Dropped Against Influencers Accused of Stock Manipulation

A federal judge has dismissed all charges against seven social-media influencers the SEC and Justice Department had accused of perpetrating a “stock manipulation scheme” on Twitter and Discord.

On Wednesday, March 20, U.S. District Judge Andrew S. Hanen of the District Court for the Southern District of Texas dismissed all charges against the defendants, ruling that the government failed to state an offense in a case alleging securities fraud. The government’s case hinged on a theory that the individuals had committed securities fraud because they posted on social media that they owned a stock and their reasons for purchasing the stock but did not also state when they intended to sell the stock. In his ruling, Hanen rejected the government’s argument that this constituted a crime and concluded that the defendants “did not deprive investors of their money or property through any misrepresentation.” A copy of the order is at this link.

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The influencers were charged by the SEC and Justice Department in December 2022 for allegedly encouraging their “substantial social media following[s]” to buy stocks by posting price targets or indicating they were buying, holding or adding to their stock positions but “regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them.”

SEC’s Expansive Take on Insider Trading Gets First Court Test

The typical example of insider trading looks something like this: an employee finds out her company is about to be acquired and buys its stock before the deal is announced. But what if the employee buys a rival company’s stock on the theory it, too, will rise?

That’s the question at stake in a trial that kicks off March 25 in San Francisco, where the US Securities and Exchange Commission is accusing a former biopharmaceutical executive of illegally trading a competitor’s stock.

Securities traders and lawyers are closely watching the case, the SEC’s first attempt to pursue so-called shadow trading. It also underscores how Congress has never explicitly defined insider trading, leaving courts to decide when the SEC oversteps its authority.

China Scrutinizes PwC Role in $78 Billion Evergrande Fraud Case

IChinese authorities are examining the role of PricewaterhouseCoopers LLP in China Evergrande Group’s accounting practices after the developer was accused of a $78 billion fraud, ramping up pressure on the global accounting giant that audited a slew of developers before the sector’s meltdown.

The country’s securities regulator this week accused Evergrande’s main onshore subsidiary Hengda Real Estate Group of recognizing sales in advance and massively overstating its revenue in the two years through 2020, prior to Evergrande’s default.

An Anglo-Italian company says it has cracked bitcoin. People have questions

Making any sense of the Quantum Blockchain’s claims requires a foundational knowledge of crypto, so what follows might be a test of patience. If you’ve done the 11 hours of study needed to become a Certified Cryptocurrency Expert™, or if are happy to suffice with the “solved Sudokus” analogy, please skip forwards until we stop talking about balloons and teacups.

SEC Climate Rule Suits Head to Eighth Circuit After Lottery

Litigation over whether the SEC can require public companies to disclose their greenhouse gas emissions and other climate-related information to investors will be consolidated and reviewed by the conservative-leaning Eighth Circuit, as the result of a lottery drawing Thursday.

The Judicial Panel on Multidistrict Litigation lottery selected the US Court of Appeals for the Eighth Circuit as the venue for hearing a case consolidating nine lawsuits against the March 6 Securities and Exchange Commission regulations filed in six different circuits, according to an order. Of the St. Louis-based court’s 17 judges, only one was appointed by a Democratic president.

Elizabeth Warren Urges SEC Probe of Tesla Governance

Senator Elizabeth Warren again urged US securities regulators to investigate whether Tesla Inc.’s board violated rules governing the independence of company directors.

In a letter to US Securities and Exchange Commission Chair Gary Gensler on Thursday, Warren said recent events have deepened her concerns that the electric-car maker’s board lacks independence from Chief Executive Officer Elon Musk.

The Massachusetts Democrat pointed to the January decision by a Delaware judge to void Musk’s $55 billion pay package and his subsequent threats to move Tesla’s incorporation from Delaware to Texas.