Eight influencers have been charged with fraud in the United States for advising their followers to buy shares they planned to sell, manipulations that allowed them to amass some $100 million in improper gains.
The individuals involved were arrested and brought before a federal judge in Houston on Tuesday, who served them with the charges against them, according to a statement released Wednesday by the US Department of Justice. They are accused of fraud in the trading of financial securities and criminal association, charges likely to earn them several decades in prison.
The American market regulator, the SEC, took him to federal civil justice, also in Texas, in the same case, for fraud and deception.
In posts on Twitter, videos or podcasts, these influencers have repeatedly advised their followers to acquire titles and keep them for at least a few days, while they were planning to sell those they owned. . All of them have more than 100,000 Twitter followers, and one of them, Edward Constantinescu (@MrZackMorris), also called Edward Constantin, has more than 500,000. They were coordinating to promote the same action jointly, in order to strengthen the effect on share price, according to the survey.
Influencers chose small companies, with a market capitalization of less than $100 million and whose shares were often priced below a dollar, called ” penny stocks “. These modest capitalizations made it possible, without a major investment, to significantly change the price of a security. These movements are similar to the so-called ” pump and dump which consists of artificially raising the price of a share with the predetermined intention of reselling it in the short term to earn a profit.
If the author of these accelerated purchases and resales has, at the same time, communicated with other investors to encourage them to buy the securities concerned, he is committing a violation of the law on the markets.
The emergence of social networks has favored that of a new generation of more or less professional financiers who give advice and recommendations directly to Internet users through this channel. In January 2021, the phenomenon known as same stocks rallied, around a few actions, in particular those of the GameStop video game store chain, thousands of small investors.
These individual investors bought titles from GameStop, but also from the AMC cinema chain, which pushed the action up, without taking into account the activity of the companies concerned and their returns. In three weeks, GameStop’s price was multiplied by 15, before falling. Thus, in passing, small carriers have been able to make significant gains, even if others have lost large sums.