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SEC Charges Trader With Fraud Over False Tweets

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What You Need to Know

  • The trader is accused of using social media to spread false statements about a defunct Nevada company.
  • The company's stock rose more than 4,000%, yielding him more than $900,000 in profits when he sold, the SEC says.

The Securities and Exchange Commission on Monday announced fraud charges and an asset freeze against an Irvine, California-based trader who used social media to spread false information about a defunct company.

The trader secretly profited by selling his own holdings of the company’s stock, the SEC said.

According to the SEC’s complaint, Andrew Fassari used the Twitter handle @OCMillionaire to tweet false statements about Arcis Resources Corp. (ARCS), a defunct Nevada company with publicly traded securities, in December.

Fassari uses similar usernames on other social media sites, such as the website investorshub.com (iHub) and Instagram, according to the complaint, which was filed under seal in federal court in the Central District of California on March 2 and unsealed Monday.

The @OCMillionaire profile joined Twitter in July 2013, lists more than 13,000 followers, includes a picture of a black Ferrari, and states, in part: “Master short squeeze artist. #Pennystock Wizard.”

Specifically, the complaint alleges that, on Dec. 9, Fassari began purchasing more than 41 million shares of Arcis stock shortly before tweeting false information about the company to his thousands of Twitter followers, including falsely claiming that it was reviving its operations, expanding its business, and being backed by “huge” investors.

The complaint further alleges that, “between Dec. 9 and 21, 2020, Fassari made approximately 120 tweets that referenced ‘$ARCS,’ dozens of which were false and misleading.”

For example, he tweeted, “$ARCS 380,000 indoor cultivation 1 Million+ sq ft processing. WEEEEEEEEE This CEO has big plans for us” and “a ton of news coming and backed by huge investors for its #cannabis operation[.]”

In seeking an injunction, the SEC alleges that Fassari continued to tweet about other stocks as recently as January and February.

The complaint further alleges that, over the next several days, “ARCS’s share price skyrocketed, ultimately increasing over 4,000%.”

The complaint also alleges that Fassari made false statements about his own trading in ARCS.

“Fassari purchased tens of millions of shares of ARCS, then deceptively spread false information about the company’s purportedly revived operations and imminent positive announcements on Twitter, among other social media platforms,” the complaint states. “After the share price rose, Fassari secretly sold all of his shares, obtaining ill-gotten gains of over $929,000.”

Between Dec. 10 and 16, Fassari allegedly sold all his shares in ARCS for profits of over $929,000, all while continuing to publish false and misleading information about ARCS and his trading in ARCS, according to the complaint.

“We allege that Fassari profited by using social media to deceive investors,” said Melissa Hodgman, Acting Director of the SEC’s Division of Enforcement in a statement. “The SEC is committed to protecting investors by proactively monitoring suspicious trading activity tied to social media, and by charging those who use social media to violate the federal securities laws.”

The SEC’s complaint charges Fassari with violating the antifraud provisions of the federal securities laws, and seeks a permanent injunction, disgorgement, prejudgment interest, and a civil penalty from Fassari.

On March 2, the SEC issued an order temporarily suspending trading in the securities of ARCS.

The SEC’s Office of Investor Education and Advocacy recently alerted investors to the significant risks of making investment decisions based on social media.

(Photo: Diego Radzinschi/ALM)