DOJ and SEC charge social media influencers in alleged $100 million stock pump-and-dump scheme

• Federal prosecutors and the SEC charged eight social media influencers in an alleged conspiracy in which Twitter and Discord were used to commit securities fraud.
• The separate criminal and civil complaints allege the defendants illicitly made more than $100 million.
• The scheme involved hyping interest in certain securities in order to raise the value and later selling shares at the artificially inflated prices, authorities said.

The seal of the U.S. Securities and Exchange Commission (SEC) is seen at their headquarters in Washington, D.C., May 12, 2021.

Andrew Kelly | Reuters

Federal prosecutors and the Securities and Exchange Commission on Wednesday charged seven social media influencers with using Twitter and Discord to commit securities fraud that netted them more than $100 million in illicit gains.

An eighth influencer was charged with aiding and abetting the alleged scheme in the SEC's civil complaint and with conspiracy to commit securities fraud in the Department of Justice's criminal case.

The seven charged with securities fraud were also charged with conspiracy to commit securities fraud by the DOJ. Authorities alleged the defendants used the social media platforms to manipulate exchange-traded stocks in a scheme going back to at least January 2020. Through widely followed Twitter accounts and stock trading chatrooms on Discord, these defendants allegedly "promoted themselves as successful traders," according to an SEC press release, and encouraged followers to buy stocks that they also purchased.

But they did not disclose to their followers while promoting those stocks that they planned to sell shares once prices or trading volumes rose, the DOJ and SEC alleged. The influencers gained a profit by pumping the stock prices and then selling once they rose, earning about $100 million in total.

Department of Justice chart detailing defendants in alleged pump and dump scam.

Department of Justice

Each of the defendants had well over 100,000 Twitter followers as of this month, the SEC complaint said. One of those accounts, @PJ_Matlock — which is run by Texas resident Perry Matlock, who calls himself the CEO of Atlas Trading — no longer exists as of Wednesday. The other primary defendants accused of securities fraud, and their Twitter handles, are Edward Constantinescu aka Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne), Stefan Hrvatin (@LadeBackk) and John Rybarcyzk (@Ultra_Calls).

Daniel Knight (@DipDeity) was charged by the SEC with aiding and abetting, and by the DOJ with conspiracy, in the alleged scheme, in part by co-hosting a podcast that promoted some of the primary defendants as expert traders. Authorities alleged Knight also traded with the other defendants and saw profits from the scheme.

Some of the defendants' Twitter bios include disclaimers at least as of Wednesday that appear to try to mitigate their legal risks. For example, Constantinescu's account says, "All my tweets are just my opinions. I'm still not a financial advisor. Parody account." Hennessey's says, "Everything is my opinion.I actively trade positions.Not a pro,Not Financial Advice,probably do the opposite." Rybarcyzk's reads "DISCLAIMER: My tweets are NOT recommendations to enter a stock. - Ideas shared on Twitter are NOT buy or sell signals. DO NOT TRADE BASED ON SOCIAL MEDIA."

Knight's bio says, "don't buy/sell off my tweets EVER."

The criminal complaint and civil lawsuit both were filed in U.S. District Court for the Southern District of Texas.

Twitter and Discord did not immediately respond to requests for comment.

Three of the influencers charged in the scheme who had open direct messages on Twitter — Deel, Rybarcyzk and Knight — did not immediately respond to CNBC's requests for comment. Messages sent to Instagram accounts that appear to be linked to Matlock, Constantinescu and Cooperman were not immediately answered. A message to a LinkedIn account appearing to be linked to Hennessey did not immediately respond to a request for comment. Contact information for Hrvatin could not immediately be found. 

Clarification: This story has been updated to reflect that defendant Edward Constantinescu is also known as Edward Constantin.

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