TheCorporateCounsel.net

On Friday, the DOJ announced that a federal grand jury in California returned an indictment charging activist short seller Andrew Left with multiple counts of securities fraud. At the same time, the SEC announced civil charges against Left and his firm, Citron Research. The DOJ’s announcement of the indictment details Left’s alleged misconduct, but this excerpt from the SEC’s announcement does so more succinctly:

The SEC’s complaint alleges that Left, who resides in Boca Raton, Fl., used his Citron Research website and related social media platforms on at least 26 occasions to publicly recommend taking long or short positions in 23 companies and held out the positions as consistent with his own and Citron Capital’s positions. The complaint alleges that following Left’s recommendations, the price of the target stocks moved more than 12 percent on average.

According to the SEC’s complaint, once the recommendations were issued and the stocks moved, Left and Citron Capital quickly reversed their positions to capitalize on the stock price movements. As a consequence, Left bought back stock immediately after telling his readers to sell, and he sold stock immediately after telling his readers to buy.

Attached to the SEC’s complaint is an appendix cataloguing the allegedly false and misleading statements by Left and Citron Research that form the basis for the agency’s enforcement proceeding. Last month, the SEC brought settled administrative charges against Anson Research associated with its involvement in activist short reports. The DOJ’s action is the culmination of a multi-year investigation into activist short selling that began in 2021 and targeted Citron and Left, among others. Whether there are other shoes to drop from either the SEC or DOJ remains to be seen.

– John Jenkins