The Securities and Exchange Commission has charged a trader with using fraudulent posts on Twitter ($TWTR) to manipulate the stock price of Sarepta Therapeutics ($SRPT). James Alan Craig, the man at the center of the case, is alleged to have created a Twitter account that looked like it belonged to securities research firm Citron Research and used it to post lies about Sarepta.
The SEC has pursued the case for almost three years. On January 30, 2013, a Twitter account purporting to represent Citron Research said Sarepta was in trouble with the FDA. Shares in Sarepta fell 16% shortly afterward, only to recover when it became clear that the allegations were false. The allegations in a separate SEC case against people accused of hacking newswires show it is possible for traders who can foresee stock drops to make significant sums of money. But Craig, despite buying nearly $20,000 Sarepta shares on the day of the tweet, made only $88 from their sale.
While the sums involved for the accused are small, the SEC views the crime as serious. "Craig's fraudulent tweets disrupted the markets for two public companies and caused significant financial losses for their investors," Jina Choi, director of the SEC's San Francisco office, said in a statement. Choi also used the statement as an opportunity to crack a rare financial watchdog joke, saying that tweets Craig posted about how it would be difficult for the SEC to find the perpetrator in "turned out to be false as well."
On a more serious note, the SEC has published a guide to help traders identify bogus social media posts, and in doing so protect companies from the panic they can induce. The threat of malicious Twitter posts is one of several ways in which IT is affecting the activities of the regulator and the companies it oversees.
- read the SEC release
- here's the litigation (PDF)