Social media plans result in fees

washington –

The U.S. government on Wednesday charged eight men with illegally profiting more than $100 million from the stock market by manipulating their novice investor followers on social media.

From early 2020 until about April of this year, the individuals, who have more than 1.5 million followers on Twitter, carried out a “pump and dump” scheme, the Justice Department and the Securities and Exchange Commission said.

Seven of the social media influencers advertised themselves as successful traders in Twitter and Discord chat rooms and encouraged their followers to buy certain stocks, the SEC said. When the price or volume of the featured stock rises, influencers “regularly sell their shares without disclosing their plans to sell the securities during the pitch,” the agency said.

“Defendants used social media to gather large numbers of novice investors and then took advantage of their followers by continually feeding them misinformation,” said Joseph Sanson, chief of the SEC’s Enforcement Division’s Market Abuse Unit.

Perry Matlock (@PJ–Matlock), John Rybarcyzk (@Ultra–Calls) and Edward Constantin (@MrZackMorris) of Texas named in SEC complaint; Thomas Cooperman (@ohheytommy) of California with Gary Deel (@notoriousalerts); Mitchell Hennessey (@Hugh–Henne) in New Jersey; and Stefan Hrvatin (@LadeBackk) in Florida.

An eighth man, Daniel Knight (@DipDeity) of Texas, co-hosts a podcast promoting the defendants as experts and trading with them.

The Justice Department said the defendants displayed their “lavish lifestyle” to fool others into thinking they were skilled stock traders.

If convicted, each faces up to 25 years in prison for conspiracy to commit securities fraud and each count of securities fraud, the department said. Constantine also faces up to 10 years in prison if convicted of engaging in illicit currency transactions.

The SEC has increasingly cracked down on social media influencers and celebrities who promote financial products, including cryptocurrencies.

In October, the SEC barred Kim Kardashian from promoting cryptocurrencies for three years and fined her $1 million to settle federal charges that she recommended a cryptocurrency security product to her 330 million Instagram followers without explicitly identifying her. There is a reward for doing so.

In 2020, actor Steven Seagal agreed to pay more than $300,000 as part of a similar settlement with the SEC that also barred him from promoting investments for three years.

In 2018, the U.S. Securities and Exchange Commission reached a settlement over professional boxer Floyd Mayweather Jr. and music producer DJ Khaled for failing to disclose payments they received for promoting digital currency investments.

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