SEC Prosecutes Individual for Social Media Securities Fraud
The SEC filed a federal securities lawsuit against an individual that touted a defunct company on social media to artificially inflate the price and locking in gains before selling. According to the SEC, the defendant sent over 100 tweets touting the defunct company and spread false information about the company’s intentions, prospects and business activities even though the subject company had discontinued operations several years earlier. The defendant also acquired the company’s abandoned domain name, which he used to fabricate emails between himself and company executives. The company’s CEO reported the social media activity to the OTC and the SEC. The SEC also asserts that the defendant lied about his trading activity in order to encourage price movements in his favor. The SEC charges the individual with securities fraud in violation of Section 17(a) and Section 10(b) and Rule 10b-5. According to an SEC Enforcement official, “The SEC is committed to protecting investors by proactively monitoring suspicious trading activity tied to social media, and by charging those who use social media to violate the federal securities laws.”
This may be the beginning of the SEC cracking down on social media stonk personalities that manipulate the market with misleading posts. You don’t need to be an issuer or registrant to incur the SEC’s wrath. Sections 17 and 10 can be used against participants in the securities markets that defraud, manipulate, and deceive for personal gain.