Short seller Andrew Left surrenders after securities fraud allegations

Andrew Left, Founder and CEO of Citron Research

Adam Jeffery | CNBC

Activist short seller Andrew Left surrendered himself in Los Angeles on Monday to face federal criminal charges of securities fraud, a spokesman for the U.S. attorney’s office there said.

Left, 54, is scheduled to appear before Judge Rozella Oliver in U.S. District Court in Los Angeles at 4:30 p.m. Eastern Time. The Citron Capital hedge fund boss is expected to be released from custody after Oliver sets bail conditions.

Left’s attorney, James Spertus, told CNBC on Monday that prosecutors had demanded that Left surrender by Monday and that the U.S. Attorney’s Office originally planned to ask for $10 million in cash for his bail.

“Then they wanted several million dollars,” Spertus said.

“It doesn’t make sense,” the defense attorney said, arguing that Left is not a flight risk or a danger to the community and that there are no victims in the case.

“This should be Mr. Left released on his own recognizance,” Spertus said. “There is no reason for any bail in this case.”

Left, who lives in Florida, was indicted by a grand jury last week on 19 criminal charges.

He is accused of using his public platform, which included social media posts about X and appearances on CNBC, to make illegal profits of at least $16 million by manipulating stock market activity and acting in a manner contrary to the positions he publicly stated he held.

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Left is also being sued by the Securities and Exchange Commission, which accused him and Citron in a civil complaint filed last week in a Los Angeles federal court of “engaging in a multi-year, $20 million scheme to defraud followers by “publishing false and misleading statements about his purported stock trading recommendations.”

“The Left boasted to colleagues that some of these statements (he made) were particularly effective in persuading retail investors to act on his recommendations, saying it was as if he “candy of a baby,” the SEC alleges in that lawsuit.

The companies named in the lawsuit, which Left alleges acted in a manner inconsistent with his public positions on their stock prices, include Nvidia, Tesla, Twitter, Meta, Roku, Beyond Meat, American Airlines, Palantir, XL Fleet, Invitae and General Electric.

His lawyer Spertus, who previously served as a prosecutor at the LAUS Public Prosecutor’s Office, told CNBC on Monday: “This case is going to fail for six independent reasons.”

Spertus said that Left’s public statements questioning the stock prices of various companies and claiming they were inflated have proven to be accurate in the vast majority of cases. He also said that Left had no obligation to anyone to maintain a trading position in a stock until the target price he announced was reached, which the lawyer said undermines the prosecution’s theory in the case.

“You are not obligated to disclose your personal trading intentions to the market,” Spertus said.

He said Left would “never” accept a settlement from the prosecutors, who he said had rejected Left’s offer to meet with them to explain why “their theory of market manipulation was flawed on its face.”

“There can be no question” of a plea agreement, Spertus said, noting that such an agreement would require Left to tell a judge what he had done that was unlawful. In this case, the attorney said, Left had done no such thing.

Spertus also said he believes the Justice Department’s prosecution of Left “is intended to deter activist short sellers and put an end to that.”

And regardless of whether Left is convicted or acquitted, Spertus said, the case will have a chilling effect on short sellers who want to share their research on companies that are allegedly overvalued or whose stock price is based on false statements.

“People will stop sharing their research with the market,” Spertus said. “It’s really bad for the financial markets to have a prosecution like this when the government agrees that the public statements were truthful.”

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