The Securities and Exchange Commission is taking aim at a new way of manipulating the stock market — by monitoring false allegations made on Twitter accounts.
The SEC filed charges in U.S. District Court on Thursday against a Scottish trader after his false tweets, using fake accounts modeled after research firms Muddy Waters and Citron Research, caused sharp drops in the stock prices of two companies.
James Alan Craig of Dunragit, Scotland, is an active trader of equities and options and was commenting on stocks through various other Twitter handles he created, including @dunragit and @HedgeyeAC, the SEC said. Craig is charged with securities fraud for tweeting multiple false statements on January 29 and 30 of 2013 about Audience Inc. and Sarepta Therapeutics Inc. SRPT, +2.47%
Audience’s share price plunged 28% as a result of tweets that falsely said the Department of Justice was investigating Audience, the SEC says. Trading was halted before the fraud was revealed and the company’s stock price recovered. Sarepta’s share price dropped 16% based on false reports that the Food and Drug Administration had seized the company’s drug trial papers and that certain trial results were tainted, the agency added. The shares recovered when the fraud was exposed. Audience Inc. was delisted in July.