Andrew Left found guilty of fraud in case that spooked short-sellers

NEW YORK – Famed short-seller Andrew Left faces the possibility of decades behind bars after being found guilty of using disingenuous social media posts to manipulate stocks, in a landmark case that threatens to chill a broader trading strategy loathed by corporate executives.

Left, who gained a large online following with his blunt commentary about major US companies as well as smaller stocks popular with retail traders, was convicted on June 1 following a three-week trial. Even before his conviction, his 2024 indictment spooked the industry and led some short-sellers to beef up legal disclaimers.

Now, the 55-year-old faces more than two decades behind bars at an Aug 31 sentencing hearing, though criminal defendants frequently get less time. Left will remain free until then.

From the day it was filed, Left’s case was closely watched by short-sellers worried they could come under fire, too. It also captivated their detractors, such as corporate executives, who hoped the government would rein in the people they blamed for hurting stock prices.

Left’s indictment followed a wide-ranging US probe of how participants in the lightly regulated short-selling industry trade. Firms typically build up bets that a particular company’s shares will fall, then issue research reports detailing their positions to the broader market.

But in Left’s case, the government took issue with how quickly Left closed out his trading positions after publicly criticising or boosting companies. While the practice has long been polarising, Left’s case marked one of the few times the issue has faced trial.

Guilty verdict

Left, the founder of Citron Research, was convicted on 13 of the 17 counts. He was accused of using explosive tweets about dozens of companies to illegally influence their shares and make a quick profit. Prosecutors said he earned more than US$20 million (S$25.7 million) from such trades from 2018 to 2023.

After the verdict, Left blasted the case as an attack on free speech and innocent trading conduct. He said it was inconceivable that he could have moved the stock of massive companies as prosecutors had alleged.

“I think the jury got it wrong,” Left said outside the courtroom. “Obviously, this is not the end of the road for us,” he said, hinting at an appeal.

At the heart of the case were Left’s tweets on the social media platform now called X. Prosecutors alleged that his private communications around the time he was posting his tweets proved that he did not always believe what he was saying about the companies and gave his followers false impressions about his trading intentions.

Left built a sizeable social media presence following prescient calls on China Evergrande Group in 2012 and Valeant Pharmaceuticals in 2015. Prosecutors claimed that from 2018 to 2023, Left published fewer reports and more tweets trash-talking stocks and setting “extreme” price targets for them.

For example, early on Jan 8, 2019, Left opened short positions in streaming-box maker Roku, then posted on Citron’s Twitter account at 9.41am that Roku was “uninvestible”, driving down the stock, according to the government. He then “falsely and misleadingly” claimed to be “watching Roku from the side”, suggesting that he was not invested in the stock, prosecutors said. In actuality, he made US$700,000 from his short that day, the government said.

‘Take candy from a baby’

Left took the rare step as a criminal defendant to testify in his own defence. That allowed him to explain his tweets and trades to jurors under friendly questioning by his lawyer. But he also faced a tense cross-examination by prosecutors who challenged his credibility and grilled him on private communications about his trading intentions that appeared to contradict his public statements about the companies he tracked. 

Left told jurors that he did not believe there was anything wrong with him profiting from the “price correction” of a stock after he issued a report or tweet about a company he thought was overvalued or undervalued.

“It’s the stock market,” Left said. “I say what I believe. I speak truth. If people want to read it, read it.”

The trader also testified that he did not believe there was any law barring him from making trades in the minutes and hours after he published social media posts or research reports on them, attempting to undercut a key element of the case.

“There is no specific period of time, I believe, you have to hold the position after you make a comment,” Left said, adding that he never commented on a company he did not believe in. 

But prosecutors presented e-mails that they said showed Left coordinated with hedge funds on stocks he planned to short and bragged that his “hot voice” with retail investors meant they could “take candy from a baby”. 

Frank Zhang, an accounting professor at the Yale School of Management, said the verdict will have a chilling effect on short-sellers because “it will scare them into silence”.

“This sets a dangerous precedent for short-sellers, who now fear that publishing negative research and exiting trades quickly will trigger federal audits and market manipulation charges,” he said. 

The verdict, which came after two days of deliberations by the jury, is a win for the US Justice Department in a white-collar criminal trial under the Trump administration – though the Left case started under former president Joe Biden. Many such prosecutions have been scrapped under US President Donald Trump, who has also issued pardons for some convicted defendants. BLOOMBERG