Did Andrew Left Commit a Crime?

Probably not. But that doesn't make his behavior ethical

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Andrew Left has been charged with market manipulation and fraud by both the SEC and the Department of Justice.

You may know Andrew Left from Citron Research. They post research reports on stocks — mostly alleging fraud — that are quite sensational. Until recently, Citron reports would cause stocks to move violently one way or another.

The government believes Andrew Left committed a crime by writing/tweeting aggressively about a stock, which caused the price to move. Then, well before the stock hit the target Left set, he would sell or cover his short. Sometimes within a day of publishing.

There are other allegations. You can read some summaries and opinions about the topic from the Bear Cave and John Hempton:

In Defense of Andrew Left

Some thoughts on the Andrew Left indictment

I am not a legal expert. Far from it. I have no idea what the outcome of this case will be.

But here’s what I think. It should be illegal to:

• Take a position on a stock (long or short)

• Knowingly lie in public about the stock, causing it to move

• Profit from the lie

• Collude with other market participants in this lie

Jordan Belfort is a criminal. But, the AMC Apes are not. I think that is the key distinction. The AMC conspiracy people are telling the world what they think and acting on it. They sincerely believe what they are saying (even if it is delusional). At least, I think most of them are.

I have no idea if Left knowingly lied. As Hempton said in his post, the government should be able to find digital evidence of the lie, so we will find out soon enough.

Here’s what I do know though. Pump-and-dump behavior is unethical. Plain and simple.

If you set a price target of $100 on a $20 stock and then sell it when the stock pops to $27 on your report, you are unethical.

We have approximately 1% of the influence of Andrew Left at Chit Chat Stocks. However, we do hope to grow our influence (more listeners = more ad dollars, sorry) and do set guidelines for ourselves around stocks discussed on the podcast.

Here are the rules:

• Never buy a stock in anticipation of a podcast episode release about said stock

• If, after recording an episode about a stock, one of us decides to buy it, wait until at least two days after the episode is released to purchase shares

• The two above rules apply to selling a stock. Do not sell right before a podcast discloses we sold the stock. Sell two days after the podcast is released. Never front-run your own audience.

We don’t lie to the audience. We don’t recommend stocks. We chit chat (hence the name) about stocks as a part of our research process and allow people to listen to these conversations.

As the disclosure says in every episode, nothing we do is a recommendation. And we mean that. Nobody should be blindly following what we say. Like any investor, we have the right to change our minds two weeks later if new information comes in.

But we would never purposefully lie about what we are doing in order to profit on a stock. We would never use our audience to “pump” a position and then profit off of that move. Not like we even have that power, anyway.

We hope you continue utilizing us in your research process. Happy earnings season to all who celebrate!

Brett

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