Scottish Citizen Indicted for Twitter-Based Stock Manipulation Scheme

Defendant Tweeted False Information about Publicly Traded Companies, Causing More than $1 Million in Losses

A federal grand jury in San Francisco indicted James Alan Craig today with securities fraud, announced Acting U.S. Attorney Brian J. Stretch of the Northern District of California and Special Agent in Charge David J. Johnson of the FBI’s San Francisco Division.

According to the indictment, Craig, 62, of Dunragit, Scotland, alleged set up Twitter accounts using names similar to real market research firms for the purpose of manipulating stock prices.  Craig issued 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 of more than $1.6 million in losses to shareholders.

According to the indictment, on Jan. 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 firm’s logo as the Twitter account’s profile picture.  Craig also used a name associated with the founder of Muddy Waters Research as the account’s handle.  On Jan. 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 another 100 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 Sarepta, a biopharmaceutical firm based in Washington.  According to the indictment, on Jan. 29, 2013, Craig set up a Twitter account with the handle @citreonresearc using a false email address purporting to belong to Citron Research, a market research firm.  Craig used Citron Research’s logo as the Twitter account’s profile picture in an effort to make the account appear to be associated with the 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 Feb. 1, 2013, Craig sold all 700 securities at an average per-share price higher than the average per-share price at which he had bought them. 

Craig was charged with a single count of securities fraud.  The Securities and Exchange Commission 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 U.S. Attorney 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 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.

Assistant U.S. Attorney Robert David Rees of the Northern District of California is prosecuting the case with the assistance of Trina Khadoo.  The prosecution is the result of an investigation by the FBI.