Citron’s Andrew Left Charged with US Criminal Fraud, Reports Reuters

By Chris Prentice

U.S. authorities have filed charges against notable activist short seller Andrew Left and his fund Citron Capital, accusing him of manipulating the market and defrauding investors through misleading statements about his stock positions, including those in Nvidia and Tesla.

On Friday, the Justice Department and Securities and Exchange Commission announced that Left utilized his social media presence and television appearances to promote his stock trades, only to swiftly alter his positions—reportedly profiting as much as $20 million in the process.

Left, who is 54 years old, allegedly concealed that third parties, including hedge funds, influenced his commentary. In exchange for payments, he would tip these parties off before making his positions public, allowing them to benefit or reduce potential losses, according to the Justice Department’s claims.

The DOJ stated, "To uphold the false impression that Citron’s recommendations and positions were genuine, Left made false and misleading representations regarding his economic incentives, beliefs in Citron’s analyses, and the valuations of targeted securities."

In response, Left’s attorney James Spertus insisted that his client will contest the charges, asserting via email, "There is no crime here. Mr. Left is a publisher who has gone to great lengths to comply with all laws, and neither the DOJ nor the SEC accuse him of publishing false information."

Left is set to be arraigned in the coming weeks at the United States District Court in downtown Los Angeles. Known for his dramatic and colorful approach, Left has been a prominent figure among "short activists" for over a decade, arguing that he targets companies believed to be overvalued or engaged in fraud.

Some of Left’s most high-profile targets have included the now-defunct China Evergrande, GameStop, Valeant Pharmaceuticals, and Shopify. Supporters of short activists argue they play a vital role in the market, while critics accuse them of employing “short and distort” tactics that can harm public companies.

The charges stem from a lengthy investigation by criminal prosecutors and SEC investigators, which commenced in 2019, focusing on short-sellers and hedge funds. Reports indicate that this scrutiny intensified with a probe by the DOJ that was first revealed in December 2021.

The authorities are investigating the discrepancies between Left’s public representations of his positions in well-known stocks and his actual trading activities, alleging he exploited this influence to manipulate stock prices for quick profits.

For instance, around October 22, 2018, the DOJ claims Left took a long position in Tesla and subsequently announced on social media that he was "LONG Tesla for this quarter." Shortly after, he sold over half of his position for a minimum profit of $1 million.

Similarly, Left promoted his long position in Nvidia, which was trading around $144, claiming he expected it to rise to $165, before selling his entire position within hours, according to the allegations.

While Left previously stated that Citron had never been compensated by a third party for stock research, the Justice Department asserts that he received over $1 million from separate hedge funds in 2018 and 2019, funds that held short positions in stocks he was targeting.

Legal experts note that proving these novel charges in court could be complex. An attorney from a New York law firm commented that while some of the activities described may be commonplace among short-sellers, falsifying information regarding one’s position and relationships with hedge funds can lead to securities law violations.

If convicted, Left could face a maximum of 25 years in federal prison for the securities fraud scheme, along with up to 20 years for each count of securities fraud and five years for making false statements, according to the DOJ. The SEC is also seeking various financial penalties and measures to bar him from serving as an officer or director of a company.