Andrew Left, founder and CEO of Citron Research
Adam Jeffery | CNBC
Activist short-seller Andrew Left turned himself in on Monday in Los Angeles to face Federal Criminal Securities Fraud Charges,spokesman U.S. Attorney’s Office Said there.
Left, 54, is scheduled to appear before U.S. District Judge Rozella Oliver in Los Angeles at 4:30 p.m. ET, and the Citron Capital hedge fund boss is expected to be released after Oliver sets bail.
Prosecutors asked Left to surrender on Monday, and the U.S. Attorney’s Office originally planned to require him to post a $10 million cash bond in lieu of bail, his attorney, James Spertus, told CNBC on Monday.
“Then they wanted millions of dollars,” Spertus said.
“It makes no sense,” the defense attorney said, arguing that Left was not a flight risk or a danger to the community and that there were no victims in the case.
“It should have been Mr. Left’s release on his own recognizance,” Spertus said. “In the circumstances, there was no grounds for bail.”
Left, who lives in Florida, was indicted by a grand jury last week on 19 criminal counts.
He is accused of using his public platform, including social media posts on X and CNBC appearances, to illegally profit at least $16 million by manipulating stock market activity and trading contrary to his publicly stated positions.
Left is also being sued by the Securities and Exchange Commission, which alleged in a civil complaint filed last week in federal court in Los Angeles that he and Citron “engaged in a $20 million, multi-year scheme to sell false and misleading statements to deceive followers” of his alleged stock trading advice. “
“Zuo bragged to his colleagues that some of these comments[he made]were particularly effective in inducing retail investors to trade based on his recommendations, saying it was like taking “Candy from a baby,” the SEC claims in its lawsuit.
The company identified in indictment Those on the left allegedly trading in ways contrary to his public stock price positions include Nvidia, Tesla, Twitter, Meta, Roku, Beyond Meat, American Airlines, Palantir, XL Fleet, Invitae and General Electric.
His attorney, Spertus, a former prosecutor in the U.S. Attorney’s Office in Los Angeles, told CNBC on Monday: “This case will fail for six separate reasons.”
Spertus said Left questioned public statements about companies’ stock prices, believing they were inflated, but they turned out to be accurate the vast majority of the time. He also said Left had no obligation to anyone to hold a stock trading position until his announced target price was reached, which lawyers said undermined prosecutors’ theory in the case.
“You have no obligation to disclose your private trading intentions to the market,” Spertus said.
He said Left would “never” accept a plea deal from prosecutors, who he said had denied Left a meeting with them to explain why “their theory of market manipulation is flawed on its face.”
Spertus said there was “no chance” of a plea deal, noting that any such agreement would have required Left to tell a judge that what he was doing was illegal. Lawyers said Left had done nothing of the sort in this case.
Spertus also said he believed the Justice Department’s prosecution of Left “is an attempt to deter aggressive short sellers who want to stop this type of behavior.”
Spertus said that regardless of whether Left is convicted or not guilty, the case will have a chilling effect on short sellers who share their views on companies that are allegedly overvalued or whose stock prices are based on misrepresentations. Research.
“People will stop sharing their research with the market,” Spertus said. “It would be really bad for financial markets to pursue an indictment like this when the government admits that public statements are true.”
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