In an alleged case of securities fraud through social media, U.S. authorities have charged a Scottish man with making false statements in tweets about two companies in order to manipulate their stock price for his own benefit.
The Securities and Exchange Commission said James Alan Craig posted the statements in January 2013 on Twitter accounts that he had designed to look like the real Twitter accounts of well-known securities research firms. The tweets stated that Audience Inc. and Serapta Therapeutics were under investigation, triggering sharp drops in their stock prices.
On each occasion, the SEC alleged in a civil complaint filed Thursday, Craig bought and sold shares of the companies in a largely unsuccessful effort to profit from the sharp price swings.
“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 a news release.
The U.S. Attorney’s Office in San Francisco also filed a criminal securities fraud charge Thursday against Craig. Prosecutors said his scheme caused losses to shareholders in excess of $1.6 million.
“This prosecution makes clear that we will find and prosecute those who commit fraud on our stock exchanges, by any means, no matter where they reside,” said Acting U.S. Attorney Brian Stretch.
According to the SEC, Craig, of Dumfries & Galloway in Scotland, began his alleged deception on Jan. 25, 2013 by creating a Twitter account that mimicked that of the Muddy Waters research firm, using its logo and referencing the name of its founder Conrad Block.
Four days later, he allegedly used the account to issue false tweets starting with, “AUDIENCE the noise suppression company being investigated by DOJ on rumoured fraud charges.” The company’s fell 28% after the first tweet, forcing Nasdaq to halt trading.
In the case of Serapta, the stock dropped 16% after Craig allegedly posted false tweets about the company on an account masquerading as that of Citron Research.
The SEC said Craig bought shares in the two companies about 10 minutes after the stocks began falling but “waited too long each time to trade the stock and therefore only profited approximately $100 collectively from his manipulations.”