A Scottish man has been formally charged by the U.S. Attorney for Northern California for manipulating stock prices by impersonating market research firms on Twitter and disseminating false information about two different companies, causing their shareholders to suffer more than a million dollars in depressed asset prices.
According to court documents, James Alan Craig registered an account on Twitter on Jan. 25, 2013 that supposedly belonged to the research firm Muddy Waters Research. Four days later, the account tweeted that Audience, a technology company based in San Francisco, was being investigated by the Department of Justice for fraud, prompting Audience’s share price to fall by 28 percent before it was halted by Nasdaq’s single stock circuit breaker.
Craig attempted to buy shares of Audience when the stock price was at its nadir, trading on his girlfriend’s TradeMonster account and buying shares 10 minutes after the stock price started falling. Later in the afternoon, the real Muddy Waters tweeted that the reports about Audience were a hoax, and the company’s share priced recovered the same day. Craig had purchased $3,549 worth of Audience stock, but only made a profit of $9.00.
The next day, on Jan. 30, Craig made an account impersonating the securities research firm Citron Research, tweeting fake news, this time making up an impending Food and Drugs Administration investigation, about the biopharmaceutical company Sarepta Therapeutics.
The tweets were sent at 11:15 a.m. (EST), and by 11:18 a.m. Sarepta’s share price had fallen by 16 percent from $29.30 to $24.50, but recovered to $28.32 by 11:23 a.m. In that brief window, Craig purchased $19,537 of Sarepta stock and made a profit of $88, bringing his total loot to $97.
In the indictment, Craig is charged with causing a loss of $1.6 million to Sarepta and Audience shareholders.
“In reaction to Craig’s false and misleading tweets and the subsequent drop in price, certain Audience and Sarepta investors sold hundreds of thousands of shares during each of the temporary stock price depressions and sustained estimated losses of approximately $1.5 million total,” reads an Securities and Exchange Commission complaint. “In addition, Craig’s tweets caused a public company and two established research firms to expend resources and respond to the tweets.”
Both fake accounts borrowed logos from the real firms, but Craig had apparently foregone purchasing fake followers to beef up the credibility of his fake accounts, which had 17 and 6 followers respectively.
This is apparently the first time prosecutors have gone after stock manipulators for using Twitter as a platform, but the social network company itself was previously the victim of stock manipulation. In July, a fake Bloomberg news article alleging the company had received a $31 billion buyout offer sent its stock price soaring by 8 percent.