US Accuses Pomelo Research Founder of Securities Fraud

The US accuses prominent short seller and founder of Citron Research, Andrew Left, of engaging in fraud through stock trading, social media posts, and research reports.

On Friday, the US Securities and Exchange Commission (SEC) charged Left with profiting approximately $20 million from illicit trades involving nearly twenty companies through his online platform by issuing false and misleading stock trading recommendations to deceive investors.

Additionally, the Department of Justice announced criminal charges against Left, accusing him of securities fraud. California federal prosecutors allege that he illegally made at least $16 million by manipulating stock market activities using his public platform, actions contradictory to the public image he presented.

The SEC alleges that Left would provide recommendations for stocks – those for which he held short or long positions, sometimes offering target prices for those stocks. He would then swiftly reverse his positions using price fluctuations that were “far higher (or lower) than” the prices he reported.

“This fraudulent scheme deceived investors and allowed Left to profit from short-term gains by exploiting his Citron Research platform reports and tweets,” said the SEC.

“Left conducted these trades through his personal accounts and accounts under his entity Citron Capital, guiding the transactions to further carry out his scheme,” the SEC stated.

Left did not immediately respond to Epoch Times’ request for comment.

Bloomberg reported that the charges against Left stem from a broad investigation into hedge funds and skeptical researchers in the US. Investigators have been seeking information on dozens of fund managers and trading activities involving over 50 stocks for three years, shocking the industry.

Previously residing in Beverly Hills, California, Left now resides in Boca Raton, Florida. In the indictment revealed on Friday, he is charged with one count of participating in a securities fraud scheme, 17 counts of securities fraud, and one count of making false statements to federal investigators.

If convicted, Left could face up to 20 years in prison.

The Los Angeles prosecutor’s office stated that the 54-year-old Left is expected to appear in Los Angeles federal court in the coming weeks, facing 19 criminal charges.

Akil Davis, Assistant Director of the FBI’s Los Angeles office, said in a statement, “Left’s appearances on financial television and his large online following have provided him with a reliable platform purportedly to mask his intentions, manipulate public investment, and seek personal gain.”

Many of the stocks that Left previously shorted have become the subject of regulatory investigations. According to his website, over 50 companies scrutinized by Citron Research since 2001 have become targets of regulatory investigations, lawsuits, or delistings from stock exchanges.

The Wall Street Journal noted that short sellers have long played a crucial role in the market. Betting on stock price declines can help investors hedge risks, identify overvalued stocks, and even uncover fraudulent activities. Shorts have historically warned investors about the 2008 credit crisis, and have helped expose scandals like Enron and Wirecard.

“Short sellers argue that their research is protected by freedom of speech. However, company executives often complain that they exaggerate company issues or mislead the public by releasing content beyond their actual understanding,” the report said.

Left became known to the Chinese audience in 2012 when he attempted to short mainland Chinese real estate developer Evergrande.

In his 2012 report, Left listed Evergrande’s five sins and seven crises, warning investors of the growing financial risks of Evergrande. The report stated, “Evergrande’s destiny is sealed, the only uncertainty is the timing.”

In 2016, the Hong Kong regulatory authority accused Left and his company of misconduct in the Evergrande report, barring him from the Hong Kong securities market for five years and levying substantial fines against him.