SEC Charges Short Seller Andrew Left and Citron Capital With $20 Million Fraud Scheme

SEC Charges Andrew Left and Citron Capital for $20 Million Fraud Scheme

The Securities and Exchange Commission today announced charges against activist short seller Andrew Left and his firm, Citron Capital LLC, for engaging in a $20 million multi-year scheme to defraud followers by publishing false and misleading statements regarding his supposed stock trading recommendations.

The SEC’s complaint alleges that Left, who resides in Boca Raton, Fl., used his Citron Research website and related social media platforms on at least 26 occasions to publicly recommend taking long or short positions in 23 companies and held out the positions as consistent with his own and Citron Capital’s positions. The complaint alleges that following Left’s recommendations, the price of the target stocks moved more than 12 percent on average. According to the SEC’s complaint, once the recommendations were issued and the stocks moved, Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements. As a consequence, Left bought back stock immediately after telling his readers to sell, and he sold stock immediately after telling his readers to buy.

U.S. Presidential Candidate Robert F. Kennedy Jr. Says He’s ‘Fully Committed’ to BTC at Bitcoin Conference in Nashville

Independent presidential candidate Robert F. Kennedy Jr. doubled down on his support for bitcoin at the BTC 2024 conference in Nashville.

“I am a huge supporter of Bitcoin. I have most of my wealth in Bitcoin,” he said. I am fully committed.”

SEC Charges Virginia Engineer with Orchestrating $30 Million Offering Fraud

The Securities and Exchange Commission today charged Babu Ramaraj, a resident of Aldie, Virginia, with defrauding more than 70 investors of approximately $31 million through his company, DAB Inspection and Consulting Services LLC.

The SEC’s complaint alleges that, from February 2019 through May 2024, Ramaraj solicited and lured his victims with the promise of 40-60 percent annual investment returns. According to the complaint, Ramaraj falsely told investors that he would use their funds to finance surety and performance bonds for large-scale, lucrative contracts DAB had been awarded to provide quality assurance services to state and local governments. Ramaraj allegedly created fake contracts and financial documentation to support his misrepresentations. The SEC alleges that, in reality, the contracts never existed, and Ramaraj instead used investor funds to purchase luxury automobiles, jewelry, and property, engage in unprofitable options trading, and pay earlier investors.

Coinbase Adds Chevron Lawyer to Board as SEC Brawl Ramps Up

Crypto exchange Coinbase Global Inc., embroiled in litigation with the US Securities and Exchange Commission, has added veteran Supreme Court lawyer Paul Clement and two others to its board of directors.

Clement is a frequent advocate before the high court, often advancing pro-business arguments, including a victory last term in Loper Bright Enterprises v. Raimondo, which could make it more difficult for the SEC to oversee the crypto industry.

SEC Improperly Served Ponzi Suspect, Prompts Vacated Judgment

The US Securities and Exchange Commission’s default judgment of more than $500,000 against a British Ponzi scheme suspect should be vacated because the commission failed to properly serve the suspect with notice of its lawsuit, a federal appeals court ruled Wednesday.

The SEC served the lawsuit via email on the alleged Ponzi scheme fraudster living overseas after exhaustive efforts concluded his foreign address was unknown.

The SEC failed to comply with the internationally agreed upon Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters when it served Thomas Megas by email, said Judge Patty Swartz …

Conflicted Regulators

The SEC’s Division of Corporation Finance (DCF) reviews registrants’ financial statements to “deter fraud and facilitate investor access to information” (SEC 2019). A large fraction of examiners conducting these reviews are accountants, most of whom previously worked at one of the Big 4 public accounting firms (Deloitte, EY, KPMG, and PwC). These Big 4 accounting firms conduct most public company audits, meaning that DCF accountants may review financial statements audited by their former employer (i.e., connected examiners). To identify connected examiners, we use FOIA requests to collect information on the professional backgrounds of over 250 DCF accountants. We then study the effects of these connections on the outcomes of over 19,000 financial statement reviews.

We find that review teams with connected examiners are significantly less likely to detect errors in the filings under review. Among a sample of reviews of financial statements that are known to contain an error (as evidenced by a subsequent restatement), teams with connected examiners are about 30% less likely to catch the error….

Everything is securities fraud

From Thursday’s close (before the bug) to Monday’s, CrowdStrike’s stock fell about 23%. That’s as classic a case of “everything is securities fraud” as you are going to get: CrowdStrike messed something up, its stock fell, there will be lawsuits. So far I have not seen any lawsuits, but here are five press releases from law firms looking for CrowdStrike shareholders to sue, so give it a few days.

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I also often add that every bad thing that happens to a public company can be securities fraud, and CrowdStrike’s botched software update definitely happened to a lot of public companies. I have not yet seen any lawyers trawling for clients to sue Delta Air Lines Inc., but it “is expected to take a sizable financial hit this quarter from the system breakdown that led to thousands of canceled flights and prompted a federal investigation of the carrier’s response,” so look out for that one too.

RTX Sets Aside $1.24 Billion to Resolve Government Probes

RTX, the company formerly known as Raytheon Technologies, has set aside $1.24 billion to resolve a series of government investigations into its business practices, including a bribery probe sparked by allegations of corrupt dealings with a member of Qatar’s ruling royal family.

The sum, which RTX disclosed in its quarterly update to investors on Thursday, will cover $384 million in penalties the defense and aerospace company expects to pay as part of a settlement with the Justice Department and Securities and Exchange Commission over the bribery allegations.