A federal court entered final judgement against a Scotland-based trader that used false tweets to drive down the value of publicly-traded securities. In two instances, the defendant used fake twitter accounts to announce that regulatory agencies were investigating the firms. He then tried to buy the stocks on the resulting dips, although he waited too long to trade and did not profit. The SEC faults the defendant for causing significant market disruption, leading to trading halts.
The use of social media to disseminate false information is a big social issue, but such conduct has significant economic and legal consequences in the securities markets. Perhaps, the regulators (led by the SEC’s Cyber-Unit) should engage with social media platforms to determine how to regulate the third-party distribution of information about specific issuers.