Short seller Andrew Left surrenders on securities fraud charges

The activist short seller Andrew Left surrendered in Los Angeles on Monday to face federal criminal securities fraud charges, a spokesman for the U.S. Attorney’s Office there said.

Left, 54, is scheduled to appear before Magistrate Judge Rozella Oliver in U.S. District Court in L.A. at 4:30 p.m. ET, where the Citron Capital hedge fund boss is expected to be released after bail conditions are set by Oliver.

Left’s lawyer, James Spertus, told CNBC on Monday that prosecutors had demanded Left surrender Monday, and that the U.S. Attorney’s Office originally intended to request a $10 million cash deposit for his bail.

“Then they wanted several million dollars,” Spertus said.

“It doesn’t make any sense,” the defense lawyer said, arguing that Left is not a flight risk, or a danger to the community and that there are no victims in the case.

“This should be Mr. Left released on his own recognizance,” Spertus said. “There’s no reason for any bond in this case.”

Left, who lives in Florida, was indicted last week on 19 criminal counts by a grand jury.

He is accused of using his public platform, which included social media posts on X and appearances on CNBC, to make illegal profits of at least $16 million by manipulating stock market activity and trading in a way that was contrary to the positions he publicly purported to take.

Left is also being sued by the Securities and Exchange Commission, which in a civil complaint filed last week in L.A. federal court accused him and Citron of “engaging in a $20 million multi-year scheme to defraud followers by “publishing false and misleading statements regarding his supposed stock trading recommendations.”

“Left bragged to colleagues that some of these statements [he made] were especially effective at inducing retail investors to trade based on his recommendations and said that it was like taking ‘candy from a baby,'” the SEC alleges in that lawsuit.

The companies identified in the indictment as ones Left allegedly traded on in ways contrary to his public stances on their stock prices included Nvidia, Tesla, Twitter, Meta, Roku, Beyond Meat, American Airlines, Palantir, XL Fleet, Invitae, and General Electric.

His lawyer Spertus, who previously was a prosecutor in the L.A. U.S. Attorney’s Office, told CNBC on Monday, “This case is going to fail for six independent reasons.”

Spertus said that Left’s public statements questioning the stock prices of various companies, arguing that they were inflated, were the vast majority of time proven to be accurate. He also said Left did not have an obligation to anyone to hold a trading position in a stock until the target price he had announced was reached, which the lawyer said undercuts the prosecution’s theory in the case.

“You have no duty to the market to disclose your private trading intentions,” Spertus said.

He said Left would “never” accept a plea deal from prosecutors, whom he said had refused Left’s offer to meet with them to explain why “their theory of market manipulation was deficient on its face.”

“There can’t be” a plea deal, Spertus said, noting that any such deal would require Left to tell a judge what he had done that was unlawful. In this case, the lawyer said, Left had done no such thing.

Spertus also said he believed the Department of Justice in prosecuting Left “is trying to deter the activist short sellers, and they want to stop it.”

And regardless of whether Left is convicted or acquitted, Spertus said, the case will have a chilling effect on short sellers sharing their research about purportedly overvalued companies or ones whose stock price is based on misstatements.

“People will stop sharing their research with the market,” Spertus said. “It’s really bad for the financial markets to have a prosecution like this when the government agrees that the public statements were truthful.”