A Scottish short seller is facing charges of profiting from stock manipulation by using social media to spread false information on two companies.
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Several tweets, suggesting Audience was under federal investigation, were said to cause the share price of the mobile audio company to fall 28 per cent before the Nasdaq temporarily halted trading. Craig is alleged to have snapped up 400 of the firm’s shares at the bottom of the market and then sold them on later for a profit when the price stabilised. The stock of the company dropped by 16 percent as a result of the scam.
According to authorities, in January 2013, Craig created Twitter accounts that appeared to belong to the influential short-selling firms Muddy Waters Research and Citron Research, carrying the handles @Mudd1Waters and @citronresearc and the logos of both companies. In that case, the company’s share price dropped and trading in the stock was halted. He Tweeted that Audience was being investigated by the U.S. Department of Justice on rumored fraud charges and that Sarepta papers had been seized by the U.S. Food and Drug Administration, prosecutors said.
He is accused of creating fake Twitter accounts that looked like those of well-known securities research firms.
He caused shareholders to lose more than US$1.6 million, the United States said in a statement. “As today’s enforcement action demonstrates, those tweets turned out to be false as well”, Choi added.
The SEC’s investigation also determined that Craig later used aliases to tweet that it would be hard for the SEC to determine who sent the false tweets because real names weren’t used.
He was charged with a single count of securities fraud and was also charged in a separate complaint by the Securities and Exchange Commission, according to prosecutors.
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The SEC is aiming for a permanent injunction against future violations, disgorgement, and a monetary penalty from Craig.
