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From U.S. law firm White & Case.

The US Securities and Exchange Commission (SEC) and the US Department of Justice (DOJ) recently announced parallel actions against an activist short seller and his firm, charging them with multiple counts of securities fraud. The charges are the latest reminder of the prevalence of short sellers who seek to drive down the stock price of public companies by engaging in "short-and-distort" campaigns. In these campaigns, short sellers sell a public company's stock short and then spread disparaging, false rumours about the company, attempting to profit from the stock price decrease caused by their misinformation.

Details of the Enforcement Actions

The DOJ indictment alleged that the activist short seller, Andrew Left, had engaged in a market manipulation scheme designed to impact the stock prices of companies that he targeted, and charged him with engaging in a securities fraud scheme. According to the DOJ, the short seller publicized sensationalized headlines encouraging readers to sell or buy the stock of a target company. The short seller then profited on the resulting stock price movement by reversing the trading positions of his firm, Citron Capital LLC. In effect, the short seller closed out positions at prices different from the target prices that he publicly recommended.

In a parallel civil action, the SEC also charged the short seller and his firm with engaging in a $20 million multi-year manipulation scheme to ......................

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