LEGAL
Investment Fraud Alert
Be wary of ‘opportunities’ found via social media
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mid the COVID-19 pandemic, social media is an increasingly common means of communication. While sites like Twitter and Facebook can help us stay connected to friends and keep up with current events, social media platforms can also be used to spread misinformation and conduct outright fraud. Accordingly, investors should be wary when using information from social media to inform their investment decisions. According to the Securities and Exchange Commission (SEC), it has experienced a significant uptick in tips, complaints and referrals involving investment scams in recent months. Social media is an attractive medium for fraudsters because they can reach large numbers of people with minimum effort and at a relatively low cost. SEC enforcement action involving false stock tweets Earlier this year, the SEC brought fraud charges against a California-based 8
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trader who used social media to spread false information about a defunct company, while secretly profiting by selling stock he owned in the company. According to the SEC’s complaint, Andrew Fassari published numerous false and misleading posts on social media platforms about Arcis Resources Corporation (ARCS), a publicly-traded company that has been defunct since at least 2016. At the same time, he was covertly trading the securities of ARCS in violation of federal securities laws. The SEC alleges that Fassari purchased tens of millions of shares of ARCS, then deceptively spread false information about the company’s purportedly revived operations and imminent positive announcements on Twitter, among other social media platforms. Fassari uses the Twitter “handle” @OCMillionaire and uses similar usernames on other social media sites. The @OCMillionaire profile joined Twitter in July 2013, lists “13.1K” followers, includes a picture of a black Ferrari,
May 2021
and states, in part: “Master short squeeze artist. #Pennystock Wizard.” The SEC’s complaint further alleges that, between December 9 and 21, 2020, Fassari made approximately 120 tweets that referenced “$ARCS,” dozens of which were false and misleading. For example, he tweeted, “$ARCS 380,000 indoor cultivation 1 Million+ sq ft processing. WEEEEEEEEE This CEO has big plans for us” and “a ton of news coming and backed by huge investors for its #cannabis operation[.]” Over the next several days, ARCS’s share price skyrocketed, ultimately increasing over 4,000%. On December 10, 14 and 16, 2020, Fassari sold all of his shares in ARCS for profits over $929,000, all while continuing to publish false and misleading information about ARCS and about his trading in ARCS. The SEC’s complaint charges Fassari with violating the antifraud provisions of the federal securities laws and seeks a permanent injunction, disgorgement, pre-
