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Wednesday, February 1, 2023

Eight “influencers” charged with securities fraud in $114 million pump-and-dump scam


In a nutshell: Authorities arrested eight men allegedly involved in a “massive” pump-and-dump scam. The suspects stand accused of artificially inflating stock prices by using their influence on Twitter and Discord to get followers to buy stock in specific businesses before selling off their own shares for an enormous profit.

According to the Department of Justice and the Securities and Exchange Commission, between January 2020 and April 2022, a group of eight social media influencers conspired to target companies buying up thousands of dollars in stock. They then promoted those buys as hot tickets on their social media accounts.

The indictment states that the stock scammers collectively had around 1.5 million Twitter followers. They also used the Discord server “Atlas Trading” to spread the bogus stock advice.” The ruse even went so far as to pose as Wall Street experts on the trading podcast “Pennies: Going in Raw,” hosted by alleged co-conspirators Daniel Knight and Mitchell Hennessey.

Once the crew got followers to purchase enough shares to raise the target stocks’ price, they dumped their own while telling their audience they were “sitting” on them for 24 hours or more.

At least one of the shysters was so arrogant that he admitted that what the group was doing was akin to robbery. During a Discord chat, Knight and co-conspirator Tom Cooperman discussed targeting GTT Communications. An unnamed cohort mentioned wanting to do the buy “in the right way” (in small increments as to not attract attention) because he feared getting caught.

“The f*cking right way?” Knight responded. “We’re robbing f*cking idiots of their money.”

In addition to Knight, Hennessey, and Cooperman, the Federal District Court for the Southern District of Texas listed the names and user IDs of five other minor social media personalities facing charges, including Edward Constantinescu, Perry “PJ” Matlock, John Rybarczyk, Gary Deel, and Stefan Hrvatin.

The group thought their Discord conversations were private, but investigators either retrieved transcripts or recorded the discussions. The freshly unsealed indictment included snippets of damning statements implicating the suspects in knowingly fraudulent activities.

“Like, what [Rybarczyk] does is he alerts it, and then, like, five minutes later all his little minions start, like, retweeting it, and saying ‘added with him,’ so it, like, builds the hype back up,” said Cooperman in Discord when explaining how the GTT buy would work. “It happens every single time. They have this sh*t down to a f*cking science. It’s great.”

In the two years their scheme was going on, prosecutors say the team collectively profited over $114 million in small increments. For instance, Rybarczyk, Dell, Cooperman, and Knight bought over 300,000 shares in GTT Communications at $1.76 per share. After misleading followers that the company was on the verge of something big, the crew dumped their stake for $1.99 per share and netted over $50,000.

All eight men face 11 counts of securities fraud and one of conspiracy to commit securities fraud. The DoJ also slapped Constantinescu with an additional offense involving illegal monetary transactions. The criminal charges carry a maximum sentence of 25 years in prison for each count. Constantinescu’s illegal transactions could buy him an extra 10 years.

And those are just the criminal indictments. The group also faces heat from the SEC, which could take all their illegal profits and assets. It could fine them additional financial penalties, as well.

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