Eight men were indicted in the Southern District of Texas for participating in a “pump and dump” scheme on Twitter and Discord, which netted them at least $114 million.
All eight of those charged are accused of committing securities fraud. As such, they used social media platforms, Discord and Twitter (where they had over 1.5 million followers), to spike interest in certain securities.
By providing false information about those securities, threat actors would “pump” their prices to only later “dump” their shares by selling them at much higher prices. The scheme earned the offenders at least $114 million between January 2020 and April 2022.
“Securities fraud victimizes innocent investors and undermines the integrity of our public markets,” said Assistant Attorney General Kenneth A. Polite, Jr. of the Justice Department’s Criminal Division. “As these charges demonstrate, the department will continue to prosecute those who defraud investors by spreading false and misleading information, including over social media, to line their own pockets.”
Apart from Twitter, where the defendants had an impressive following, they also ran an online community for individual stock traders called Atlas Trading. Threat actors presented it as “one of the largest, free online communities in the world” and used it to furtherly deceive users.
In order to gain credibility and earn more followers, they would share pictures of their lavish lifestyle and luxurious belongings, posing as expert stock traders.
“We are committed to protecting the investing public from market manipulation schemes, regardless of how they are carried out,” said US Attorney Alamdar S. Hamdani for the Southern District of Texas. “As some use advances in technology and social media to prey upon the public, our office will be on the cutting edge of prosecuting this area of fraud.”
Eight defendants are hence charged with one count of conspiracy to commit securities fraud each. Edward Constantinescu, aka Constantin, 38, is also charged with three counts of securities fraud and one count of engaging in monetary transactions in property derived from specified unlawful activity. Perry “PJ” Matlock, 38 and Gary Deel, 28; John Rybarczyk, 32; and Stefan Hrvatin, 35, Tom Cooperman, 34, and Mitchell Hennessey, 23, are charged with five, four, and two counts of securities fraud, respectively.
These charges (conspiracy to commit securities fraud and each charged count of securities fraud) carry a maximum penalty of 25 years in prison – with additional maximum 10 years faced for Constantin’s separate charges.
"Financial crimes like securities fraud may not be violent, but they certainly are not victimless," said Special Agent in Charge James Smith. "The eight individuals arrested today are accused of costing investors, specifically their social media followers who trusted them, millions of dollars by a ‘pump and dump’ market manipulation scheme they allegedly carried out on popular social media platforms.”
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