“This Case Is Going To Fail”: Lawyer For Andrew Left Says He’d “Never” Accept Plea Deal

Short seller Andrew Left surrendered in Los Angeles this afternoon, CNBC reported. 

James Spertus, the lawyer representing Left who was previously a prosecutor in the L.A. U.S. Attorney’s Office, said Monday prosecutors had ordered Left to turn himself in that day. Initially, the U.S. Attorney’s Office planned to request a $10 million cash deposit for his bail.

“Then they wanted several million dollars,” Spertus said. “It doesn’t make any sense. This should be Mr. Left released on his own recognizance. There’s no reason for any bond in this case.”

Spertus argued Left isn’t a flight risk, or a danger to the community – and that there are no victims in the case. “There can’t be” a plea deal, he said, since it would require Left to tell a judge that what he did was unlawful, which he says it wasn’t. 

“This case is going to fail for six independent reasons,” Spertus said. “You have no duty to the market to disclose your private trading intentions.”

He said he thinks the DOJ “is trying to deter the activist short sellers, and they want to stop it.”

Lawyer James W. Spertus, center

Spertus told CNBC that, irrespective of Left’s conviction or acquittal, the case will deter short sellers from publicly sharing their research on companies they believe to be overvalued or whose stock prices are based on false information.

“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.”

As we wrote days ago, Federal prosecutors charged short seller Andrew Left with fraud last Friday, accusing him of making misleading statements about stocks to profit from price moves triggered by his reports, according to an exclusive by the Wall Street Journal. 

Known for his firm Citron Research, which targets market “lemons,” Left gained fame for betting against Valeant Pharmaceuticals and for betting against GameStop during the meme stock craze, but he has seen less success in recent years.

The DOJ wrote in a press release out Friday morning:

According to the indictment, Andrew Left, 54, formerly of Beverly Hills, California, and now a resident of Boca Raton, Florida, was a securities analyst, trader, and frequent guest commentator on cable news channels such as CNBC, Fox Business, and Bloomberg Television. Left conducted business under the name “Citron Research” (Citron), an online moniker he created as a vehicle for publishing investment recommendations. Citron’s online presence included a website and a social media account on X, formerly known as Twitter.

His media presence amplified his impact, leading followers to mimic his trades, prosecutors said:

As alleged in the indictment, Left commented on publicly traded companies, asserting that the market incorrectly valued a company’s stock and advocating that the current price was too high or too low. Left’s recommendations often included an explicit or implicit representation about Citron’s trading position—which created the false pretense that Left’s economic incentives aligned with his public recommendation—and a “target price,” which Left represented as his valuation of the company’s stock. Sometimes, the commentary represented Left’s own work. Other times, Left disseminated the commentary of third parties as his own. The commentary routinely included sensationalized headlines and exaggerated language to maximize the reaction it would get from the stock market. As alleged, Left knowingly exploited his ability to move stock prices by targeting stocks popular with retail investors and posting recommendations on social media to manipulate the market and make fast, easy money.

The Wall Street Journal reported that Left faces charges of securities fraud and lying to federal investigators, with accusations of manipulating at least 15 stocks to earn $16 million over five years. Prosecutors claim he exaggerated potential stock price declines, sometimes closing positions after minimal price drops.

The press release continued: 

As further alleged in the indictment, in the leadup to publication of Citron’s commentary, Left established long or short positions in the public company on which he was commenting in his trading accounts and prepared to quickly close those positions post-publication and take profits on the short-term price movement caused by his commentary. Left allegedly used his advance knowledge and control over the timing of a market-moving event to build his positions using inexpensive, short-dated options contracts that expired from the same day that he published his commentary to within five days. Left also allegedly submitted limit orders, often prior to publication of his commentary, to close his positions as soon as the company’s shares reached a certain price and at prices vastly different from the target prices that Left recommended to the public. While Left made false representations to the public to bolster his credibility, behind the scenes, Left allegedly took contrary trading positions to reap quick profits off the stocks he either promoted or pilloried through Citron.

Left’s indictment concludes a three-year investigation into short sellers’ tactics. Prosecutors also allege Left concealed ties to hedge funds that traded on his early research, sharing profits with him. He denied these allegations to investigators in January 2021.