Citron founder pleads not guilty to fraud over short seller calls

Andrew Left, the founder of short-selling financial research firm Citron Research, has pleaded not guilty to several securities fraud charges laid against him on July 26.

Left reportedly appeared in a 40-minute-long hearing in a federal court in Los Angeles, where Judge Rozella Oliver imposed a $4 million unsecured bond and a $1 million collateralized bond against Citron’s founder.

Left — who once said the cryptocurrency industry is rife with “fraud” — will need to post the collateralized bond by Aug. 5, according to Bloomberg’s July 29 report.

Oliver ordered Left to surrender his passport after United States Assistant Attorney Brett Sagel successfully argued that Left posed a flight risk, pointing to more than $70 million in assets, including a property abroad.

“He can walk out of this country and live a very luxurious life,” Sagel said.

The short-seller cannot make any financial transactions above $100,000 without special permission and his trading activity has been restricted.

Left’s hands were cuffed during the court proceedings, and he mostly answered Oliver's questions with one-word “yes” or “no” responses, according to the report.

His trial date has been set for Sept. 24.

Both the US Securities and Exchange Commission and the Department of Justice laid charges against Left on July 26.

Both agencies alleged that Left profited $16 million by making “bait and switch” stock recommendations that misled retail investors.

“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.

Left’s lawyer, James Spertus, reportedly described the SEC and DOJ’s case as “defective” and that Left had no duty to disclose his personal trading intentions.

Spertus reportedly said Left would “never” accept a plea deal from prosecutors as it would imply what he had done was unlawful.

The case against Left stems from a nationwide effort to examine the relationships between hedge funds and short-seller research firms.

Citron has targeted the crypto industry before — recommending investors short Coinbase stock following the exchange’s temporary outage on Feb. 28.

Activist short sellers have also targeted crypto firms

Other “short seller firms” have targeted crypto firms in recent months, which may be looking closely at the outcome of Left’s case too.

Fellow short-seller firm Culper Research slammed Bitcoin (BTC) mining firm IREN on July 11, calling out the “wildly overvalued” firm for talking “big game” about its artificial intelligence and high-performance computing plans but not backing it up with invested capital.

IREN said it spent less than $1 million per megawatt to build its HPC center but experts say between $10 million and $20 million is needed to build a fully operational one, Culper explained:

“To analogize, IREN claims that it’s set to win the Monaco Grand Prix, but just arrived to the track in a Toyota Prius.”

IREN’s stock is down 24.6% since Culper’s July 11 short-seller report on the firm, according to Google Finance.

Kerrisdale Capital analysts also released a short-seller report on Bitcoin miner Riot Platforms on June 5 — claiming Riot “does a far better job playing energy arbitrage games and issuing stock than generating shareholder value by mining crypto.”