Eight personal finance influencers were charged with fraud on Wednesday after authorities said they made $100 million by promoting stocks they planned on dumping, taking advantage of their followers.
According to the SEC complaint, the group of influencers, who primarily have followings on Twitter, Discord, and podcasts, would collectively agree to buy one small-valuation stock, driving up the price, then use their platforms to recommend the stock to their followers. The influencers would go as far as pushing out false predictions about the future stock price and then “regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them,” the agency said in a press release.
“The defendants used social media to amass a large following of novice investors and then took advantage of their followers by repeatedly feeding them a steady diet of misinformation, which resulted in fraudulent profits," Joseph Sansone, chief of the SEC enforcement division’s market abuse unit, said in a statement on Wednesday. “Today’s action exposes the true motivation of these alleged fraudsters and serves as another warning that investors should be wary of unsolicited advice they encounter online.”
Seven of the defendants, Perry Matlock (@PJ_Matlock), Edward Constantin (@MrZackMorris), Thomas Cooperman (@ohheytommy), Gary Deel (@notoriousalerts), Mitchell Hennessey (@Hugh_Henne), Stefan Hrvatin (@LadeBackk), and John Rybarczyk (@Ultra_Calls), built their followings by creating content highlighting their personal finance expertise. The influencers would often post images of their wild gains from daily trades and investments and showed the spoils of a lifestyle with seemingly unlimited wealth — sports cars, helicopter rides, and private pool parties.
In addition to the SEC charges, the men have been indicted on criminal charges that could send them to prison for up to 25 years if found guilty. Each has been charged with one count of conspiracy to commit securities fraud. Constantin was charged with three counts of securities fraud, and one count of engaging in monetary transactions in property derived from specified unlawful activity, according to a press release from the Department of Justice. Matlock and Deel are both charged with five counts of securities fraud; Rybarczyk with four; and Hrvatin, Cooperman, and Hennessey with two counts of securities fraud each. Their first court appearance was on Tuesday.
Their followings on Twitter ranged from 100,000 to 600,000 — Constantin, with 549,900 followers, has the largest audience. The group also used Hennessy’s iHeartRadio podcast Pennies: Going in Raw, which launched in July 2020, to promote their chosen stock. Hennessy’s cohost, Daniel Knight (@DipDeity), was also charged by the SEC with “aiding and abetting the alleged scheme.” (iHeartRadio didn’t immediately respond to a request for comment from BuzzFeed News.)
The SEC also said that the “pump and dump” arrangement has been ongoing since January 2020. Though the supposed “experts” include disclaimers on their profiles about their recommendations and posts solely being opinions, many people looked to them as advisers and informed guides in the field of investing. Often, the influencers would respond to followers' questions about what stocks to purchase and offer their opinions on the future of the market.
To avoid arousing suspicion, some of the Discord chats and tweets recommending the targeted stock were later deleted, the SEC complaint reads. The SEC also included transcriptions of allegedly recorded conversations between the influencers, including one between Knight and Cooperman on March 1, 2021, in which Knight said, “Get caught? … We’re robbing idiots of their fucking money.”
“Indeed, in private chats and surreptitiously recorded conversations, they bragged and laughed about making profits at the expense of their followers,” the complaint reads.
The charges were filed in the US District Court for the Southern District of Texas, where Matlock, Constantin, Rybarczyk, and Knight reside. Cooperman and Deel live in California, while Hrvatin lives in Florida and Hennessey in New Jersey. The SEC complaint seeks to impose fines on the group amounting to the $100 million their scheme allegedly made, as well as permanent injunctions and civil penalties against each person.
“I love my homies on here. The rest of you can keep swinging on my nuts,” Constantin tweeted Wednesday. Matlock has since deleted his account, and none of the other influencers have issued public statements.