The SEC Needs To Arrest Some People – Sarepta Therapeutics Fake Tweet Edition

• Posted by kid dynamite
• on January 30th, 2013

I’m going to give the SEC the benefit of the doubt and assume that, despite the fact that it sometimes seems to take them a while to get things done, they will crunch the data, do the research, and find the people responsible for this nonsense and prosecute them.   I’m talking about two consecutive days of someone (perhaps different people) using fake Twitter accounts designed to mislead investors and fraudulently impact stock prices.

Here’s what happened:   there’s a firm, Citron Research, who is known for exposing fraudulent companies and advocating strong short cases.    Citron has a Twitter account under the name @Citronresearch.   Enter the fraudster:  he creates a Twitter account with the name @Citreonresearc (note, though the display name is still Citron Research, and also that the account has since been suspended), and tweets:

“$SRPT FDA steps in as its 48 weeks results on Eteplirsen results are tainted and have been doctored they believeTrial papers seized by FDA.”“

This fraudster even stole Citron’s logo.   Thanks to @BlackHawkTrader, who captured this screenshot:

The result?  Kaboom:

Apparently, this same thing happened yesterday in another stock – ADNC, with another “wel-regarded” short seller, Muddy Waters, as the firm being imitated.

Now, some readers might astutely ask me a question like,

“Hey, KD, didn’t you say that everyone needs to be responsible for their own trading actions?  I mean, isn’t that one of your core beliefs, and something you repeat Ad Nauseum on this blog?”

ABSOLUTELY – people do need to be responsible for their own actions, and should verify information before they panic-trade.

The next logical question is:

“Hey, KD, haven’t you told us many times that stupid computers are good for smart people?  Who cares if some ig’nant algo read this fake Tweet and sold stock down 16%?”

Yes, absolutely – someone else’s panic mistake is your opportunity for gain.

Note, though that neither “personal responsibility” nor “we benefit from stupid computers doing stupid things” belittle the fact that these false tweets from the fraudulent immitation Twitter accounts are the very DEFINITION of stock manipulation.   This shit is blatantly illegal, and must be prosecuted loudly and publicly:

“Manipulation

Manipulation is intentional conduct designed to deceive investors by controlling or artificially affecting the market for a security. Manipulation can involve a number of techniques to affect the supply of, or demand for, a stock. They include: spreading false or misleading information about a company; improperly limiting the number of publicly-available shares; or rigging quotes, prices or trades to create a false or deceptive picture of the demand for a security. Those who engage in manipulation are subject to various civil and criminal sanctions.”

Let me be clear about a few things: I have never had a position in $SRPT or $ADNC.  I was not harmed in any way by these fraudsters, but their actions infuriate me.   I do assume that the SEC will eventually get around to following up on these blatantly fraudulent actions, but I hope they are very loud and harsh in their punishment – as a deterrent to future would-be-fraudsters.   Even though Twitter was diligent about suspending the offending account, the damage was done as soon as the false information was disseminated.   My boys at Stocktwits are proud to report that the bogus info never made it to the Stocktwits stream.

I am offering my services to the SEC to help in any way possible.  I don’t know what sort of way that could be, as I’m sure the SEC has a lot more data than I do, but anyway, hit me up, yo – SEC…

-KD

disclosure: no positions in $SRPT, $ADNC.  massively short stock fraud and manipulation.

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