Eight charged in alleged ‘pump and dump’ social media influence stock scheme
Daryna Antoniuk December 14, 2022

Eight charged in alleged ‘pump and dump’ social media influence stock scheme

Eight charged in alleged ‘pump and dump’ social media influence stock scheme

Eight men who allegedly made at least $114 million from a “pump and dump” stock manipulation scheme have been charged by federal prosecutors. 

According to an indictment released on Tuesday, the group posted false and misleading information about certain stocks on Twitter and Discord recommending followers purchase them without disclosing the intent to then sell them later at artificially inflated prices — a practice called “dumping.” The charges were brought by the Securities and Exchange Commission in the Southern District of Texas.

The defendants — all based in the U.S. — pretended to be “trustworthy stock-picking gurus,” posting pictures showcasing their profits and extravagant lifestyles and encouraging people to follow their recommendations, which would likely “lead to significant wealth.”

The men ran their scheme for more than two years, from January 2020 to April 2022, according to the indictment released by the U.S. Department of Justice on Wednesday. 

The group has shared investment advice with over a million social media followers on Twitter, Discord, and YouTube. One of the members, Daniel Knight, co-hosted a popular stock-trading podcast that allegedly deceptively promoted the stocks that the other defendants intended to dump.

To cover up their scheme, the defendants deleted old tweets and Discord chats and lied to their followers about the reasons why particular stock picks were followed by declines in their prices, the SEC alleges. At the same time, the men didn’t disclose that they were either planning to sell or were actively selling a selected stock.

“On some occasions, defendants lied about losing money on a particular stock when in reality they had profited handsomely, in order to generate trust among their followers,” according to the SEC.

For the so-called “pump and dump” scheme each defendant will face a maximum penalty of 25 years if convicted. One of the defendants, Edward Constantin, who had more than half a million followers on Twitter, will also face a maximum penalty of 10 years in prison if convicted of engaging in unlawful monetary transactions.

Constantin and Perry Matlock, another defendant, are co-founders of Atlas Trading, a stock-trading forum on Discord. The group called this forum “one of the largest, free online communities in the world for individual stock traders.”

The SEC obtained the defendants’ private Discord records where they discussed their manipulations. “We’re robbing f*cking idiots of their money,” Knight said on March 1, 2021.

When the lawsuit became public, Atlas Trading’s channels disappeared from Discord and some of the defendants’ Twitter accounts were suspended.

“Securities fraud victimizes innocent investors and undermines the integrity of our public markets,” said Assistant Attorney General Kenneth A. Polite. “The department will continue to prosecute those who defraud investors by spreading false and misleading information, including over social media, to line their own pockets.”

Daryna Antoniuk is a freelance reporter for Recorded Future News based in Ukraine. She writes about cybersecurity startups, cyberattacks in Eastern Europe and the state of the cyberwar between Ukraine and Russia. She previously was a tech reporter for Forbes Ukraine. Her work has also been published at Sifted, The Kyiv Independent and The Kyiv Post.