Beyond Stupid
“Media corporations have a civic responsibility not only to prevent fraud and financial abuse, but also to not corrupt or degrade our culture.”
– Charles Pickering, former U.S. appellate judge.
Ten days earlier, Left allegedly told a colleague the opposite: That he expected Beyond Meat to go to $100.
The shares were trading around $87 when Left hammered the stock like a chicken-fried steak. He was so well-known for his pronouncements – thanks to regular TV appearances – that Beyond Meat stock plunged. Within seven minutes, Left allegedly dumped most of his short positions for a tidy profit.
This is but one example in an 19-count indictment that the Justice Department announced on Friday, accusing Left of making at least $16 million in ill-gotten stock gains from March 2018 to October 2023.
“This defendant allegedly used his platform as a securities commentator to manipulate the markets and enrich himself in the process,” U.S. Attorney Martin Estrada said in a press release.
According to the Office of Public Affairs:
“As alleged in the indictment, Left commented on publicly traded companies, asserting that the market incorrectly valued a company’s stock and advocating that the current price was too high or too low. Left’s recommendations often included an explicit or implicit representation about Citron’s trading position—which created the false pretense that Left’s economic incentives aligned with his public recommendation—and a “target price,” which Left represented as his valuation of the company’s stock. Sometimes, the commentary represented Left’s own work. Other times, Left disseminated the commentary of third parties as his own. The commentary routinely included sensationalized headlines and exaggerated language to maximize the reaction it would get from the stock market. As alleged, Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money.
“As further alleged in the indictment, in the leadup to publication of Citron’s commentary, Left established long or short positions in the public company on which he was commenting in his trading accounts and prepared to quickly close those positions post-publication and take profits on the short-term price movement caused by his commentary. Left allegedly used his advance knowledge and control over the timing of a market-moving event to build his positions using inexpensive, short-dated options contracts that expired from the same day that he published his commentary to within five days. Left also allegedly submitted limit orders, often prior to publication of his commentary, to close his positions as soon as the company’s shares reached a certain price and at prices vastly different from the target prices that Left recommended to the public. While Left made false representations to the public to bolster his credibility, behind the scenes, Left allegedly took contrary trading positions to reap quick profits off the stocks he either promoted or pilloried through Citron.
“To further the scheme, Left allegedly advanced the false pretense that his investment recommendations were credible because he was independent and free from any financial conflicts of interest. However, Left allegedly concealed Citron’s financial relationships with a hedge fund by fabricating invoices, wiring payments through a third party, and making false and misleading statements to the public about Citron’s relationship with hedge funds. In addition, Left allegedly lied to law enforcement, stating that Citron “never” exchanged compensation with a hedge fund or coordinated trading with a hedge fund in advance of the issuance of its commentary.
[…]
“Left is charged with one count of engaging in a securities fraud scheme, 17 counts of securities fraud, and one count of making false statements to federal investigators. If convicted, he faces a maximum penalty of 25 years in prison on the securities fraud scheme count, 20 years in prison on each securities fraud count, and five years in prison on the false statements count.”
Left’s attorney, James Spertus, says Left plans to fight the charges. “There is no crime here,” he said in an email to Reuters.
What’s Beyond Stupid is why anyone who would listen to this guy.
What’s Beyond Even Stupider is that the financial media regularly platforms such stock-tipping blabbermouths with no way of vetting how they actually trade.
CNBC calling
So of course CNBC noticed Left’s “Beyond Stupid” tweet and sent him an email asking about his short position. CNBC may have been under the false impression that Left actually managed money, but his firm, Citron Capital, had zero outside investors, according to the indictment. Prosecutors said he created this impression by making false and misleading statements.
Left allegedly saw CNBC’s email as a double-dip opportunity. He replied: “Shorted some today.”
“This statement was materially false and misleading because Left had exited the majority of his short exposure,” the Justice Department alleges. “Six minutes after this email exchange, Citron took additional short exposure in BYND.”
About an hour later, CNBC ran with this headline: “Short seller says Beyond Meat hype is ‘beyond stupid,’ places bet against the shares.” Citron then dumped its short position after the headline drove the stock down further, the Justice Department complaint alleges.
Full disclosure: I worked on CNBC’s website as a markets editor for about 18 months. It was not my best career move. We put out headlines at a dizzying pace, often relying on the same sources over and over again. The game was amplifying analyst reports and tweets from money managers without much editorial balance. It’s a bit of a click farm, and I was not a good fit. The incident involving BYND stock outlined above occurred before my time at CNBC.
Nobody loves a short seller
Short sellers place bets that the price of a targeted stock will go down. CEOs and long investors, who are betting on gains, typically hate them.
Short sellers have long been “disparaged as vultures, rumor mongers, cheats and criminals.” But they are also venerated. Check out this 2017 New York Times Magazine profile on Left comparing him to a journalist exposing corporate fraud.
I tend to think of shorts as God’s little messengers that all is not well with the financial world – at least when they are behaving honestly.
I’ll never forget when Lehman Brothers blamed its looming collapse on shorts during the 2008 financial crisis. The doomed Wall Street investment bank even got the Securities and Exchange Commission to temporarily ban short selling.
Lehman, however, was imploding under the weight of its financial idiocy. The shorts just happened to be the ones who noticed first and made money watching it fall.
Short sellers get accused of market manipulation when they immediately trade after bashing a stock, or trade contrary to their public statements. This is where Left is alleged to have gone wrong.
Left, of course, is considered innocent until proven guilty. And it’s worth noting that the charges against him stemmed from a years-long investigation of short sellers and hedge funds, which some may argue smacks of a reprisal from powerful short haters.
Left faces up to 25 years in prison on the criminal charges, but he’s also going to be fighting the Securities and Exchange, which filed civil charges, accusing him of $20 million in frauds.
Left is 54 years old, has lived in Beverly Hills, and now resides in Boca Raton, Fla. (Yes, Florida Man followers, it’s always some guy from Boca, isn’t it?)
The allegations run deeper
Left is also accused of collaborating with unnamed hedge funds and lying about these arrangements to investigators.
The indictment alleges Left took payments from hedge fund managers and told them what he planned to say – selling them a crooked edge.
Here’s what Left allegedly wrote to one money manager about Cronos Group, a Canada-based global cannabinoid company.
“We can make money in weed,” Left wrote, according to the indictment, “we can DESTROY CRON.”
Pump and dump
Left didn’t just trash stocks. He also made money hyping them, according to the indictment.
“Citron buys $NVDA,” Left tweeted in November 2018, regarding stock of chipmaker Nvidia. “We see $165 before we see $120.”
Nvidia’s stock was trading at about $144 at the time. Major media outlets reported Left’s tweet, and within two hours Left dumped his shares at about $151 for a profit of at least $960,000, the Justice Department alleges.
I could go on with these fast-money tales. The indictment alleges frauds relating to 23 companies on at least 26 separate occasions, including American Airlines, India Globalization Capital, Invitae, General Electric, Namaste Technologies, Meta, Palanir, Roku, Tesla, XL Fleet, and X, formerly known as Twitter.
Here’s an example of Left yakking on CNBC:
Paying for commercials
As subscribers to cable or streaming services, we are essentially paying to watch commercials.
Business channel programing entails way too much stock promotion – whether it’s buy, sell or hold – and its basically a form of advertising. (I say this as one who not only worked at CNBC, but also used to make regular appearances on Fox Business.)
To CNBC’s credit, it reported on Left’s indictment. The episode should be considered a dent in its credibility, but it likely won’t hurt a bit given the irresponsible things that competing media outlets do.
Most talking heads are probably not stock market manipulators or pump-and-dump artists, but none truly know the future and can’t be taken seriously when they pretend that they do.
It’s indeed Beyond Stupid, but business news programs have a lot of time to fill and they can’t stop hosting slicksters who are mainly just talking their books.
If they got rid of them all, what would they have … Left?
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Al Lewis has written for The Wall Street Journal, Dow Jones, CNBC, Houston Chronicle, Denver Post, Rocky Mountain News, and until recently, The Messenger – one of the biggest blunders in digital media history — you can read My Latest Blunder (The Messenger) here in case you missed it.
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