So, I guess pump and dumps aren’t legal after all. Or so says the Fifth Circuit in its reversal of the dismissal of criminal securities fraud charges against the social medial “finfluencers” known as “Atlas Trading,” best known for the twitter handle “@MrZackMoris” of one of the defendants, Edward Constantinescu. […]
The defendants claimed that the goal of their scheme wasn’t to deprive their followers of property, but simply to enrich themselves. The Southern District of Texas, relying on the Supreme Court’s decision in ????????? ?. ?????? ??????, concluded that the defendants could not have committed securities fraud or conspired to commit securities fraud because the victims were not necessarily buying the shares from the defendants and were therefore only deprived of economically valuable information (i.e. the fact that the defendants intended to sell)….
This struck me as absurd at the time, and it looks like the Fifth Circuit agrees. In a very short seven-page opinion, the Fifth Circuit said that securities fraud is still securities fraud, even when the money flows through the black box that is the public securities markets. Both money and common shares of specific public companies are fungible, and securities fraud in public markets has never required direct tracing of proceeds to recipients of the false information. Rejecting the argument that the defendants only wanted to make themselves rich, not to harm their victims, the Court rightly notes that this is “a distinction without a difference.”
Source: John Guild on LinkedIn