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The SEC has charged eight influencers for their involvement in a $100 million securities fraud scheme. According to the Securities and Exchange Commission, the men used social media platforms such as Discord and Twitter for stock manipulation.
The SEC listed the names of the defendants and social media handles in a Wednesday press release. They also include Texans Perry Matlock (@PJ_Matlock), Edward Constantin (@MrZackMorris), John Rybarcyzk (@Ultra_Calls) and Daniel Knight (@DipDeity), California natives Thomas Cooperman (@ohheytommy) and Gary Deel (@notoriousalerts) . as Mitchell Hennessey (@Hugh_Henne) from New Jersey and Stefan Hrvatin from Florida (@LadeBackk).
Seven of the named defendants promoted themselves on various social platforms as successful traders, but the SEC alleges they engaged in insider trading. They gained hundreds of thousands of followers by using Twitter and Discord, buying stocks and then urging their followers to do the same. According to the SEC, when novice traders purchased stocks, increasing trading volumes and prices, the accused would sell their stocks without notifying their followers.
The eighth defendant, Daniel Knight, is said to have helped and fueled the crowds through his podcast that he co-hosted with Mitchell Hennessey. Pennies go in raw. Knight promoted the others as experts and gave them what amounted to a megaphone for them to use to further their scam. Described a now-deleted speaker webpage for Knight and Hennessey Tokens as the “largest and fastest growing stock market podcast.” It also said that Hennessey was “a self-made millionaire” who “created Hugh Henne with the intent of helping others open Roth IRAs, understand the stock market with ease, and give back to a community that has given him so much.”
In the release, Joseph Sansone, chief of the SEC Enforcement Division’s Market Abuse Unit, said: “The defendants used social media to gather a large following of early-stage investors and then took advantage of their followers by repeatedly feeding them a steady diet of misinformation, resulting in fraudulent profits of approximately $100 million.”
“Today’s action exposes the true motivations of these alleged fraudsters,” Sansone continued, “and serves as an additional warning that investors should be wary of unsolicited advice they encounter online.”
The 39 page SEC complaint showed how casually such a schedule came about. It also detailed some of the defendants’ methods, stating that “sometimes they spread false or misleading news about certain stocks through social media or podcast interviews,” while at other times the “primary defendants lied about losing money on a certain share when in reality they had profited heavily to instill confidence in their followers…”
The complaint contained telling transcripts of Discord voice chats between some of the defendants who were unaware they were being recorded. On March 1, 2021, while discussing alleged securities manipulation, Daniel Knight said, “Get caught? We’re robbing… morons of their money…”
In another transcript, the complaint alleged that “Knight acknowledged that he understood that the primary defendants engaged in market manipulation, and explained why he posted fewer endorsements on Twitter and Atlas than the primary defendants.”
“[Playing] stupid doesn’t work in court,” Knight said at one point, “it’s market manipulation. I mean look up the definition of market manipulation.”
The SEC release indicated it will seek “permanent injunctions, remission, precautionary interest and civil fines against any defendant, as well as a penny stock bar against Hrvatin.” In addition, the commission filed criminal charges “against all eight individuals … in a parallel action brought by the Justice Department’s Fraud Division and the U.S. Attorney’s Office for the Southern District of Texas.”
This is an ongoing investigation.
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