Fake Tweets About Stocks Trigger SEC, DOJ Charges

By Phyllis Diamond

Nov. 5 — A Scotland man is facing civil and criminal charges he posted phony tweets about two companies in a bid to send their stock prices downward.

The fake tweets caused sharp drops in the companies' stock price, the Securities and Exchange Commission said in a release—even triggering a trading halt in one of them.

At the same time, the SEC issued an Investor Alert warning about fraudsters who may try to manipulate share prices by using social media to spread false or misleading information.

Defendant James Alan Craig of Dunragit, Scotland, isn't represented by counsel, court documents show. Both complaints were filed in the U.S. District Court for the Northern District of California.

Real Twitter Accounts

According to the SEC, Craig tweeted numerous false statements about the companies on Twitter accounts he created to look like the actual Twitter accounts of well-known securities research firms.

Allegedly, Craig’s first fake tweets caused one company’s share price to plummet 28 percent before Nasdaq temporarily halted trading. “The next day, Craig’s false tweets about a different company caused a 16 percent decline in that company’s share price.” Both times, Craig traded the companies' shares “in a largely unsuccessful effort to profit from the sharp price swings,” the SEC said.

Investor Losses

“As alleged in our complaint, Craig’s fraudulent tweets disrupted the markets for two public companies and caused significant financial losses for their investors,” Jina L. Choi, director of the SEC’s San Francisco Regional Office, said in the release.

“Craig also said in later tweets that the SEC would have a hard time catching the perpetrator. As today’s enforcement action demonstrates, those tweets turned out to be false as well.”

To contact the reporter on this story: Phyllis Diamond in Washington at pdiamond@bna.com

To contact the editor responsible for this story: Phyllis Diamond at pdiamond@bna.com

To see the SEC complaint, go to http://www.bloomberglaw.com/public/document/Securities_And_Exchange_Commission_v_Craig_Docket_No_315cv05076_N. To see the Investor Alert, go to http://www.sec.gov/oiea/investor-alerts-bulletins/ia_rumors.html.