The US Securities and Exchange Commission (SEC) and the Department of Justice (DOJ) have charged Andrew Left and his firm, Citron Capital, with orchestrating a $20mn fraud scheme.

The high-profile case alleges that Left issued false and misleading statements about stock investments, impacting multiple companies, including Freedom Holding Corp. (FRHC). If convicted, Left could face up to 25 years in prison, with charges including fraud related to Nvidia and Tesla.

According to the SEC, Left manipulated the stock market by publicly recommending long or short positions in 23 companies, including FRHC, through his website Citron Research and social media platforms. These recommendations caused significant stock price movements, allowing Left and Citron Capital to profit by quickly reversing their positions. The DOJ also detailed instances where Left allegedly made false statements about his positions in Tesla and Nvidia, leading to substantial personal profits.

The SEC's complaint suggest that Left's actions deceived investors, leveraging his influence to manipulate stock prices for personal gain. This practice is particularly harmful to small investors who cannot react as swiftly. Similar allegations have been made against other companies Left targeted, including Shopify and Bausch Health.

The DOJ claims that Left concealed his ties to third parties, including hedge funds, who compensated him for his comments and were forewarned about his recommendations.

Citron Research claims contributed to a wave of short-seller attacks on Kazakhstan's Freedom Holding Corp in 2023, the company claims. US firm Hindenburg Research accused FRHC of market manipulation and falsifying financial statements, causing an 8% drop in its stock price.

An independent audit in January 2024 found these allegations to be unsupported by evidence, and said the claims against FRHC were baseless.

A spokesperson for Freedom Holding Corp condemned the actions of Citron and Hindenburg, stating that their allegations aimed to unfairly drive down the company's share price.

This case is part of a broader US effort to scrutinize the relationships between hedge funds and so-called "sceptical researchers" like Left. The investigation, ongoing since 2019, has sought information on numerous fund managers and activists involved in similar activities.

"Andrew Left exploited his followers, inducing them to trade on false pretenses while profiting from the resultant market movements," said Kate Zoladz, director of the SEC's Los Angeles regional office. The SEC is seeking various penalties against Left and Citron, including disgorgement, monetary penalties, and bans on holding certain positions.

Legal experts note that while some of Left's actions may be typical in the short-selling community, they can still violate securities laws when deceptive practices are involved. If found guilty, Left faces severe penalties, including up to 25 years in federal prison for the fraud scheme, with additional penalties for each count of securities fraud and making false statements.