Intelligo Unpacks Short-Seller, Andrew Left’s Long Game

When it comes to investments, we all wish we had a crystal ball to telegraph the unpredictable future of the stock market, guiding us to buy, sell, or hold with supernatural confidence. This ever uncertain terrain has become fertile ground for empires built by so-called pros sharing their stock predictions, insights and opinions. But with so many so-called intuits out there, it begs the question, how do we trust the integrity of these recommendations? Are they based on great instincts and a knack for predicting market movement or is the plot thicker? And ultimately, what’s in it for them?

In the case of Andrew Left and his popular newsletter Citron Research, a lot. $20 million to be exact. Left gained the trust of his readers over time, launching Citron Research in 2018, where he shared his stock tips and trade recommendations via a newsletter and affiliated social accounts. His X (formerly Twitter) account alone had amassed over 100,000 followers. Citron Research was Left’s second venture, introduced in the wake of Citron Capital, where Left ironically researched and reported on fraud cases in the hedge fund world. Today, it’s Left who faces fraud charges for allegedly short selling his readers, fabricating websites, testimonials, and invoices in the process to cloak his fraudulent practices. 

According to a statement from the director of the SEC’s Los Angeles Regional Office, “Andrew Left took advantage of his readers. He built their trust and induced them to trade on false pretenses so that he could quickly reverse direction and profit from the price moves following his reports. We uncovered these alleged bait-and-switch tactics, which netted Left and his firm $20 million in ill-gotten profits, and we intend to hold Left and his firm accountable for their actions.” 

In a classic case of bait and switch, Left allegedly persuaded readers to sell stocks which he promptly bought back and buy stocks which he in turn sold. His suspected scheme involved 23 companies which he endorsed long and short positions to the public as he concurrently reversed the positions behind the scenes, capitalizing on the stock price shifts he instigated. According to the SEC, the affected stocks averaged 12% in movement. “And while Left publicly claimed his hedge fund was up 40% in its first year, the SEC alleges that Citron Capital never had any outside investors. In reality, Left only used Citron Capital as a vehicle to trade his own money, the regulator said in its complaint,” according to Alternatives Watch. Regulatory filings on the SEC website confirms Citron Capital lacked investors and public records due diligence on a fund manager would have noted this.

In an attempt to legitimize his scam to readers while keeping his profits undetected by the watchful eye of the SEC, Left constructed a fraudulent ecosystem, secretly creating anonymous websites endorsing Citron’s own tweets and reports in order to amplify trades and milk the resulting profits, according to the SEC. Additionally, Left concealed a $1 million payout from a hedge fund in exchange for Citron Research publishing various reports and tweets by fabricating invoices for “consulting services” that were never rendered, according to investors. 

On July 26, 2024 the SEC filed an official complaint in the U.S. District Court for the Central District of California, charging Citron Capital with violating anti-fraud provisions of the federal securities laws. If convicted the SEC seeks disgorgement, prejudgment interest, and civil monetary penalties against Left and Citron and conduct-based injunctions, an officer-and-director bar, and a penny stock bar against Left. Concurrently, the Fraud Section of the Department of Justice and the U.S. Attorney’s Office for the Central District of California announced additional charges against Left.

In a world where fraudulent and self-serving stock recommendations run rampant, how do you determine solid advice? Clear up cloudy predictions and unsound endorsements by properly vetting your sources. Schedule a free demo with Intelligo today to foresee a more stable future in the stock market.