Scottish Citizen Indicted for Twitter-Based Stock Manipulation Scheme
SAN FRANCISCO—A federal grand jury in San Francisco indicted James Alan Craig today with securities fraud, announced Acting United States Attorney Brian J. Stretch and the Federal Bureau of Investigation, Special Agent in Charge David J. Johnson.
According to the indictment, Craig, 62, of Dunragit, Scotland, is alleged to have set up accounts at Twitter using names similar to real market research firms for the purpose of manipulating stock prices. Craig issued so-called “Tweets” with false and fraudulent information about publicly-traded securities, causing the price of the securities to rapidly decline. Craig then bought securities of the targeted companies through his girlfriend’s brokerage account and later sold them at a higher price per security. Craig’s actions are alleged to have caused losses to shareholders in excess of $1,600,000.00.
According to the indictment, on January 25, 2013, Craig set up a Twitter account with the handle @Mudd1Waters using the alias “Shun Ho” and a Gmail address he previously created. In an effort to make the account appear to be associated with Muddy Waters Research, a market research firm, Craig used the logo of that firm as the Twitter account’s profile picture. As part of that same effort, Craig used a name associated with the founder of Muddy Waters Research, as the account’s handle. A few days later, on January 29, 2013, Craig used the @Mudd1Waters Twitter account to publish multiple false and fraudulent Tweets about the Bay Area sound technology company, Audience. For example, Craig Tweeted that Audience was being investigated by the “DOJ” on rumored fraud charges. Audience’s security price on the NASDAQ stock exchange fell significantly in the wake of Craig’s Tweets until trading was halted. That same day, Craig used his girlfriend’s TradeMonster account to purchase 300 shares of Audience’s securities. The next day, he bought 100 more shares of Audience’s securities. Craig then sold all 400 securities at a per-share price higher than the 300 he had bought the day before.
The indictment describes a similar scheme involving the Washington-based biopharmaceutical firm Sarepta. According to the indictment, on January 29, 2013, Craig set up a Twitter account with the handle @citreonresearc using a false e-mail address purporting to belong to Citron Research. As the Twitter account’s profile picture, Craig used the logo of Citron Research, a market research firm, in an effort to make the account appear to be associated with that firm. The next day, Craig used the @citreonresearc Twitter account to publish multiple false and fraudulent Tweets about Sarepta’s business activities, such as that Sarepta’s trial papers were seized by the “FDA.” Sarepta’s security price fell significantly in the wake of Craig’s Tweets. That same day, Craig used his girlfriend’s TradeMonster account to purchase 700 total shares of Sarepta’s securities. Then, on or about February 1, 2013, Craig sold all 700 securities at an average per-share price higher than he average per-share price he had bought them the day before.
Craig was charged with a single count of securities fraud, in violation of Title 18, United States Code, Section 1348. The Securities and Exchange Commission has filed a separate complaint today charging Craig with securities fraud.
“The allegations in this indictment describe a significant stock price manipulation committed through the use of social media,” said Acting United States Attorney Brian Stretch. “This prosecution makes clear that we will find and prosecute those who commit fraud on our stock exchanges, by any means, no matter where they reside.”
“This investigation dismantled a stock market manipulation scheme that operated with one goal in mind—to falsely defame a company in order to destroy its stock value for financial gain,” said Special Agent in Charge David J. Johnson. “The FBI is dedicated to stopping this type of predatory behavior. It causes substantial harm to businesses, deceives the average investor and erodes overall confidence in the markets.”
An indictment merely alleges that crimes have been committed, and all defendants are presumed innocent until proven guilty beyond a reasonable doubt. If convicted, Craig faces a maximum sentence of 25 years’ imprisonment and a fine of $250,000, plus restitution if appropriate. However, any sentence following conviction would be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.
Assistant U.S. Attorney Robert David Rees is prosecuting the case with the assistance of Trina Khadoo. The prosecution is the result of an investigation by the Federal Bureau of Investigation.