SEC Moves Against Eight Influencers Over $100M Fraud Scheme

The SEC took legal action against eight individuals involved in a $100 million fraud scheme, the agency said in a press release published today. The regulator said the defendants defrauded hundreds of thousands of investors by promoting and manipulating the share prices of several small-cap stocks.

SEC Sues Eight Influencers for Defrauding Investors on Discord and Twitter

In a press release Wednesday, the securities regulator said it filed charges against eight individuals for their involvement in a $100 million securities fraud scheme. SEC said the defendants defrauded investors by promoting and manipulating the prices of a group of stocks on social media platforms Twitter and Discord.

According to the press release, seven named defendants touted themselves as expert stock traders and accumulated hundreds of thousands of followers on Twitter and Discord since 2020. The individuals allegedly invested in certain public stocks and encouraged their followers to buy the same securities. While there are a number of top stock trading discords which are legitimate and trustworthy, this cannot be said for the eight named individuals.

But according to the complaint, the defendants offloaded their stock holdings when the securities’ prices rose without ever notifying their followers about plans to sell. The SEC alleges that the defendants “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.”

– Joseph Sansone, Chief of the SEC Enforcement Division’s Market Abuse Unit.

Some of those named in the lawsuit include the founders of Atlas Trading, known as Zack Morris and PJ Matlock on Twitter. Morris and Matlock have allegedly conspired with several other individuals in a fraudulent scheme that involved manipulating the prices of certain small-cap stocks.

The SEC also charged Daniel Knight, known as @DipDeity on Twitter, for aiding the scheme through several actions, such as co-hosting a podcast in which he promoted a number of the defendants as professional traders. Knight also performed trades in consultation with the individuals and gained profits.

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SEC Continues to Clamp Down on Crypto Industry

The SEC’s move comes just a day after the securities regulator filed a lawsuit against Sam Bankman-Fried, the founder and former CEO of the now-bankrupt FTX. The SEC charged SBF for defrauding investors in one of the biggest-ever schemes in the crypto industry.

Similarly, the agency charged four individuals for allegedly creating and operating a “Global Ponzi Scheme” in November. According to the SEC, the individuals ran a “Trade Coin Club” from 2016 to 2018 and scammed over 100,000 investors during that period.

The SEC and other global regulators have been cracking down on the crypto sector and calling for tighter regulations as billions of dollars worth of investor funds remain unrecoverable in the wake of recent collapses.

Do you think the SEC and other regulators should continue tightening their grip over the stock and crypto sectors? Let us know in the comments below.