Securities Fraud Charges Dropped Against Social Influencers Accused of Stock-Manipulation Scheme
A federal judge has dismissed all charges against seven social-media influencers the SEC and Justice Department had accused of perpetrating a “stock manipulation scheme” on Twitter and Discord.
On Wednesday, March 20, U.S. District Judge Andrew S. Hanen of the District Court for the Southern District of Texas dismissed all charges against the defendants, ruling that the government failed to state an offense in a case alleging securities fraud. The government’s case hinged on a theory that the individuals had committed securities fraud because they posted on social media that they owned a stock and their reasons for purchasing the stock but did not also state when they intended to sell the stock. In his ruling, Hanen rejected the government’s argument that this constituted a crime and concluded that the defendants “did not deprive investors of their money or property through any misrepresentation.” A copy of the order is at this link.
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The individuals cleared in the matter are Perry Matlock, Edward Constantin, Thomas Cooperman, Gary Deel, Mitchell Hennessey, Stefan Hrvatin and John Rybarcyzk. The government’s case against them had been scheduled to go to trial April 1.
“The allegations were flawed, riddled with error and easily disprovable,” Hennessey said in a video posted Thursday on his X account, @Hugh_Henne. “I was arrested by the FBI and accused of misconduct that I was innocent [of] from the get-go… The DOJ never had evidence I committed a crime because I didn’t.” Hennessey said the government’s “baseless allegations have had profound impact on me and my family, my reputation.”
Hennessey was represented in the case by Jackson Walker partner Laura M. Kidd Cordova and associate Michael Murtha. “It is an absolute honor and privilege to represent Mitch Hennessey,” Cordova, who led the defense, said in a statement. “It was clear to me from the beginning that he did not commit any crime, and it is incredibly gratifying that the judge recognized that and dismissed all charges against him.”
The influencers were charged by the SEC and Justice Department in December 2022 for allegedly encouraging their “substantial social media following[s]” to buy stocks by posting price targets or indicating they were buying, holding or adding to their stock positions but “regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them.”
Another individual charged in the matter was Daniel Knight (aka @DipDeity), whom the DOJ accused of aiding and abetting the alleged scheme. On March 27, 2023, Knight entered a guilty plea to the charge of securities fraud. Knight’s sentencing hearing is set for July 29, according to the DOJ.
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