A Los Angeles jury convicted Andrew Left on Monday of securities fraud, delivering a sharp verdict in a case that had put one of Wall Street’s best-known short-sellers on trial for the way he used social media and trades together.
Left, the 55-year-old founder of Citron Research, was found guilty on the top count of running a securities fraud scheme and on 12 of 16 other counts tied to specific trades. Jurors acquitted him on four counts. He now faces as much as 25 years in federal prison when he is sentenced on Aug. 31.
The conviction lands today because the case has become a test of how far short-sellers can go when they publish market-moving views online. Left made his name by posting scathing reports about public companies, and the federal case has been watched closely for what it could mean for speech, trading and the rules that govern both.
Prosecutors said Left misled retail investors and damaged companies by using social media to publicize Citron Research reports, then trading around the reaction those posts created. They told jurors his followers bought and sold after his posts, while he quietly closed his own positions at different prices than the ones he had recommended. In closing, prosecutor Matthew Reilly said Left was duplicitous, “tweeting with one hand and trading with the other.” The government also said he boasted that profitable trades were like “taking candy from a baby” and claimed he could “send a stock tumbling with a single tweet.”
Left took the stand in his own defense and said he was simply warning investors about companies he believed were on shaky footing. He said he had no legal duty to wait until a stock reached the target price he set before making his own moves, and he argued that his activity was no different from that of any other short-seller. “I think the jury got it wrong and it’s not the end of the road,” he said after the verdict, sounding defiant as the panel’s decision settled over the courtroom.
That fight now moves to sentencing, with Aug. 31 set as the next hard date and the judge still facing a mistrial motion that had not been ruled on immediately. However that motion is resolved, the conviction marks a major blow for a trader who once used his voice as aggressively as his positions, and whose case will likely echo well beyond Citron Research.
