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Fraudster Gets Big Fine After Profiting $100 On Stock Market Manipulation

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If you are going to commit securities fraud (and we do not suggest you do!) you may as well go big. Especially, if you are going to taunt the SEC and other regulators about how they will never catch you. However, at least one person was willing to risk a massive fine and possible jail time to make a $100 profit (no typo) on blatant stock market manipulation.

According to a filing made by SEC legal staff on November 5th in federal court in San Francisco, James Alan Craig of Scotland created several fake Twitter accounts resembling those of well-known short-seller market research firms in his attempt at stock market manipulation. He then sent out tweets with false negative information about a number of publicly traded stocks. While this was widely reported last last week many people missed the best part of the scheme – the fraudster pocketed a grand $100.

Sixty-two-year-old Craig is an active trader in the financial markets, and lives in Dumfries & Galloway, Scotland. Craig’s alleged scam resulted in a halt in trading in one of the stocks, and cost shareholders in the firms at least $1.8 million, but according to the SEC filing Craig only profited a total of $100 from his fake tweet campaign.As the SEC notes “He waited too long each time to trade the stock and therefore only profited approximately $100 collectively from his manipulations.”

Stock Market Manipulation – Multiple tweets

The bogus Twitter accounts set up by Craig very closely resembled those of short seller firms Muddy Waters Research and Citron Research. The scam went on from January to July of 2013.

A tweet sent in January 2013 from one of the fraudulent accounts stated that Audience (a California tech firm) was being investigated by U.S. federal investigators on fraud charges. Audience shares almost immediately dropped by 28%..

Shortly thereafter, Craig tweet about a hotly debated biotech stock, Sarepta Therapeutic, saying the FDA had pulled the plug on a clinical trial due to falsified results. This caused Sarepta shares to drop by 16% in less than an hour.

The SEC alleges:

Craig bought $3,549.00 worth of Audience stock, but failed to catch the stock’s intraday low price. He later sold these shares for a profit of approximately $9.00.

In an odd twist, Craig did buy stock in both Audience and Sarepta (before the trading halt kicked in). The filing notes that Craig only made a profit of around $100 in total with his small trades in the stocks he manipulated.

As the SEC notes:

On January 25, 2013, Craig created a Twitter account with the handle @Mudd1waters. He designed this Twitter page to mislead the public into believing that tweets issued from this account were those of established equity research firm Muddy Waters. He purposely made the Twitter handle resemble that of Muddy Waters’s legitimate Twitter account: @muddywatersre. In addition, the fake Twitter page he created used the already existing logo of Muddy Waters, and referenced “Conrad Block,” which is similar to the name of Muddy Waters’s founder Carson Block. 10. On January 29, 2013, Craig created the @Citreonresearc Twitter account. He designed the Twitter page to again dupe the public by mimicking the existing securities research firm Citron Research’s Twitter page. He also intentionally made the Twitter handle resemble that of Citron Research’s real Twitter account: @CitronResearch. In addition to creating a very similar Twitter page and handle, Craig used Citron Research’s logo on the fake Twitter page, and provided a link to Citron Research’s website.

Stock Market Manipulation – James Craig apparently not the sharpest knife in the drawer

Craig either had a guilty conscience motivating his actions or is not the sharpest knife in the drawer, as he tweeted that the SEC “needed to arrest someone for the fraudulent tweets” just hours after he sent them. SEC San Francisco director Jina Choi did not crack a smile when she commented: “Craig also said in later tweets that the SEC would have a hard time catching the perpetrator. As today’s enforcement action demonstrates, those tweets turned out to be false as well.”

Not only will he be forfeit the $100 but he has more fines coming for the stock market manipulation. The SEC states:

Enjoin Defendant from future violations of Section 10(b) of the Exchange Act [15 U.S.C. § 78j(b)] and Rule 10b-5 there under [17 C.F.R. §§ 240.10b-5].

II. Order Defendant to pay civil money penalties pursuant to Section 21(d) of the Exchange Act [15 U.S.C. §78u(d)].

III. Order Defendant to disgorge his ill-gotten gains according to proof, plus prejudgment interest thereon.

While we do not enjoy watching people suffer it will be fun to see how much this fool has to pay for his plot at stock market manipulation.

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