For years, Andrew Left and his short-selling fund Citron Research were a swashbuckling presence on social media, accusing companies of fraud and misdeeds, and making stock bets that he was right.
On Friday, the Securities and Exchange Commission accused Left and Citron of fraud themselves, saying they misled investors with stock recommendations to the amount of $20 million.
At the heart of the SEC lawsuit is the allegation that Left and Citron repeatedly made bold claims about investments — both short and long — in companies, and then attached aggressive price targets to the associated stocks. But instead of seeing those bets through, the SEC says, Left and Citron would quickly take a profit once the stock moved because of their claims.
“Left bought back stock immediately after telling his readers to sell, and he sold stock immediately after telling his readers to buy,” the SEC said in a press release accompanying the lawsuit. The securities agency said that such moves made him about $20 million in trading profits at the expense of others in the market.
Citron didn’t immediately respond to requests for comment sent through Citron’s website and its account on X, formerly Twitter. Endpoints News wasn’t immediately able to reach Left, who didn’t appear to have an immediate comment to other outlets, including the Wall Street Journal.
In biopharma, Left and Citron — the name is a wink to the idea that some stocks are lemons — rose to fame because of their targeting of Valeant Pharmaceuticals. While Left wasn’t the first to identify that there was something fishy at Valeant, his aggressive use of Twitter to target the company, and a talent for appearing on financial news networks with bold accusations and sound bite-perfect quotes, added to the maelstrom around the company.
Valeant rose from a little-known drug company to one of the hottest stocks on Wall Street, with an aggressive, debt-fueled acquisition strategy that helped boost the stock more than 10-fold. But behind the scenes, the company was using an affiliated network for pharmacies to boost sales, as Left, other short-sellers and journalists uncovered.
What resulted was one of the greatest and most rapid destructions of value on Wall Street since the financial crisis, as the stock collapsed, the CEO was hospitalized and eventually left, and the company faced accusations of fraud that it later settled. It was later rebranded as Bausch Health, taking on the name of one of its acquisitions and shedding the moniker that had generated so much infamy.
SEC allegations
In Friday’s complaint, the SEC accused Left and Citron of misleading investors 26 different times across a variety of stocks, including Twitter, Tesla, AbbVie, Novavax and many others.
His recommendations were not necessarily wrong — at least in the long term. With Novavax, for example, Citron and Left described the vaccine developer in April 2020 as a “serial promise and non deliver on every virus,” and set a price target of $15.
The pandemic fueled a huge rise in the company’s shares over the next few years, and it eventually brought a Covid-19 vaccine to market. But it never managed to convert that accomplishment into lasting business success. By 2023, it had announced hundreds of job cuts in a bid to stay afloat, and its shares were trading below $10.
But Left had sold well before then, according to the SEC.
In addition to the civil claims from the securities regulator, the Department of Justice and the US Attorney’s Office for the Central District of California have also announced charges, the SEC said. The DOJ charges include criminal allegations of fraud, similar to the SEC’s claims.
Ironically, for all the attention Left and Citron generated over the years, his firm appears to have never been a major investor with vast sums at his command that could push around markets with their weight. The SEC complaint says that Left traded largely with his own money (though the suit accuses him of taking money from a hedge fund in return for helping promote certain positions).
In an interview with the WSJ in 2014, Left — riding high from his success with Valeant — reflected on his attention-grabbing methods and use of social media.
“Sometimes you have a great story and the biggest challenge is, ‘How do I get people to read it?’” Left told the WSJ. “Wall Street research is painfully boring. I enjoy being entertaining.”
Editor’s note: This story has been updated to include details of the criminal charges.