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Regulation and Compliance > Federal Regulation > SEC

SEC Charges 8 in $100M 'FinTwit' Stock Scheme

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The Securities and Exchange Commission Wednesday charged eight individuals in a $100 million securities fraud scheme in which they used the social media platforms Twitter and Discord to manipulate exchange-traded stocks.

“To their legions of followers on social media, the eight defendants have, for years, promoted themselves as trustworthy stock-picking gurus.  In reality, they are seasoned stock manipulators,” the SEC complaint states. “They identify stocks ripe for manipulation, acquire substantial positions in these securities, and then recommend those stocks as good investments to their followers on Twitter, in online stock-trading forums they run, and on podcasts.”

The complaint continues: “They encourage their followers to purchase the selected stocks, often claiming that they likewise have bought or intend to buy these stocks for themselves and hold them. Instead, the defendants sell their shares into the demand that their deceptive promotions generate.”

According to the SEC, since at least January 2020, seven of the defendants promoted themselves as successful traders and cultivated hundreds of thousands of followers on Twitter and in stock trading chatrooms on Discord.

Seven individuals were charged with securities fraud:

Name State of Residence Twitter Handle
Perry Matlock Texas @PJ_Matlock
Edward Constantin Texas @MrZackMorris
Thomas Cooperman California  @ohheytommy
Gary Deel California @notoriousalerts
Mitchell Hennessey New Jersey @Hugh_Henne
Stefan Hrvatin Florida @LadeBackk
John Rybarcyzk Texas @Ultra_Calls

“These seven defendants allegedly purchased certain stocks and then encouraged their substantial social media following to buy those selected stocks by posting price targets or indicating they were buying, holding, or adding to their stock positions,” the SEC said.

However, as the complaint alleges, “when share prices and/or trading volumes rose in the promoted securities, the individuals regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them,” the complaint states.

The complaint further charges Daniel Knight (@DipDeity), of Texas, with aiding and abetting the alleged scheme by, among other things, co-hosting a podcast in which he promoted many of the other individuals as expert traders and provided them with a forum for their manipulative statements. Knight also traded in concert with the other defendants and regularly generated profits from the manipulation, according to the SEC.

Influence and Manipulation

From at least January 2020 through present, the eight defendants earned approximately $100 million from this stock-manipulation scheme, the SEC said.

Each of the defendants amassed substantial numbers of followers on Twitter, where they regularly post about stocks they are manipulating, the complaint states.

“The term ‘FinTwit’ refers to the community of Twitter users that regularly tweet about finance and the stock market. Defendants considered themselves influential within the FinTwit community.”

The complaint notes that each defendant included disclaimers on their Twitter accounts that they were not providing stock recommendations or financial advice.

“But they intended for their followers to act on their promotional tweets, and understood that their followers would do so,” the complaint states.

“Constantin, for example, acknowledged in an interview with Knight and Hennessey on [a podcast called 'Pennies: Going in Raw'] PGIR:  ‘I understand that if I call something, you know, everybody and their mom is going to buy.’”

Joseph Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit, said in a statement that the defendants “used social media to amass a large following of novice investors and then took advantage of their followers by repeatedly feeding them a steady diet of misinformation, which resulted in fraudulent profits of approximately $100 million. Today’s action exposes the true motivation of these alleged fraudsters and serves as another warning that investors should be wary of unsolicited advice they encounter online.”

The SEC’s complaint, filed in the U.S. District Court for the Southern District of Texas, seeks permanent injunctions, disgorgement, prejudgment interest, and civil penalties against each defendant, as well as a penny stock bar against Hrvatin.

Criminal charges against all eight individuals also were filed in a parallel action brought by the Department of Justice’s Fraud Section and the U.S. Attorney’s Office for the Southern District of Texas.

The SEC’s investigation is ongoing. The investigation resulted from a referral from the Division of Examinations by Mark Gera, John Kachmor, Nitish Bahadur, and Raymond Tan in the Boston Regional Office.


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