Eight men have been indicted in a $114 million ‘Pump and Dump’ securities fraud that ran from January 2020 until April 2022. All have been arrested and will appear in court in Houston. There is both a criminal complaint filed by the Justice Department and a civil complaint, filed by the SEC.
The men allegedly manipulated stock prices by publishing false and misleading information on Twitter, on podcasts and through an online forum called Atlas Trading. Edward Constantin from Montgomery, TX and Perry Matlock from The Woodlands co-founded Atlas. Mr. Constantin, aka “MrZackMorris” had 551,000 Twitter followers while Mr. Matlock had 340,000.
Another defendant, John Rybaracyzk, from Spring had 267,000 followers and founded another stock trading forum on Discord. Other defendants are from Beverly Hills, New Jersey, Miami and Houston.
The scheme was simple. One or more of the group would buy a penny stock and tell the others in the group, allowing them to buy in at lower prices, prior to the manipulation. Then they would promote the stock to their followers. They would announce price targets, tease upcoming news and/or state their intentions to buy or hold their current positions.
After promoting the stock, they would sell their shares. Often they would continue to recommend their followers buy the stock, while not disclosing that they were selling their shareholding.
In the indictment, the first example given is of Camber Energy (CEI), a Houston-based penny stock. On August 3-4, 2021 three defendants bought a combined 2.2 million shares at an average price of 46 cents each. At 3.37pm on August 4, one defendant posts on Twitter and on Atlas “I added CEI for the swing… Last time it was at these prices, we went to $3”. Matlock posts on Atlas one minute later, echoing the sentiment.
Within the next four minutes, all three had sold a combined 465,000 shares after the stock rose by a penny. The cycle of promotional tweets and simultaneous sales happened five more times that day as the stock rose to 50 cents. Between August 3 and August 5, the three defendants made $54,989 through their misleading posts on CEI.
Constantin followed with a similar pattern and between September 1, 2021 and October 5, 2021, he made $4.3 million on buying and selling CEI stock.
It appears that someone known to all the defendants is working with prosecutors and helped build the case against them. The indictment refers to two unindicted co-conspirators. It also refers to private Discord chats between some of the defendants that were surreptitiously recorded.
That includes these two classics from one of the defendants, Daniel Knight (who lives in Houston);
‘Get caught? … We’re robbing f*cking idiots of their money…’
“. . . I mention a stock the less likely I get involved whenever all of Atlas gets a class action lawsuit . . . I’m playing this extremely smart, for the very long term. If you don’t think all
these f*ckers go to jail or at least get sued, you are crazy. . . .PJ is posting McLarens, $10 mill accounts, green 400 f*cking days in a row, come on. Every purchase over $10,000
immediately gets turned to the SEC. And it’s like everything he f*cking buys. . . . Just wait and see. . . . It’s market manipulation.
All defendants are charged with one count of conspiracy to commit securities fraud. Most are also charged with multiple counts of securities fraud. If convicted, each defendant faces a maximum penalty of 25 years in prison for conspiracy to commit securities fraud and each charged count of securities fraud. Constantin also faces a maximum penalty of 10 years in prison if convicted of engaging in unlawful monetary transactions.