A federal judge has dismissed an indictment against seven Twitter users and a podcaster accused of running a $100 million stock manipulation scheme over social media.
The Securities and Exchange Commission did not do enough to describe the influencers’ activities as a “scheme to defraud,” wrote District Judge Andrew Hanen of the US District Court for the Southern District of Texas, in an order dated Wednesday.
In the lawsuit, the SEC had alleged a lucrative “pump-and-dump” scheme in which the social media influencers used the messaging app Discord to promote certain stocks to “hundreds of thousands of followers,” and then quietly sold their positions after a run-up in the stocks’ prices.
At least one of the defendants whose account CNN reviewed at the time of the suit had tweeted about Gamestop and AMC, two so-called “meme stocks” that saw significant public interest and trading in 2021.
On Wednesday, however, Hanen wrote that while the defendants may well have intended to separate followers from their money, the evidence did not support a finding of actual securities fraud or conspiracy to commit fraud.
“The key question is whether one statement by one of the co-defendants that ‘we’re robbing … idiots of their money,’ which is alleged in the Indictment, is sufficient,” the judge wrote. “This statement sufficiently alleges ‘intent to defraud’ … but does not on its own sufficiently allege that Defendants executed, or conspired to execute, a ‘scheme to defraud’ investors of money or property” as defined by court precedent.
Unlike a traditional fraud case, Hanen added, the SEC merely claimed investors were deprived of relevant market information — not that the influencers directly stole money from investors.
The indictment was dismissed without prejudice, meaning charges could potentially be amended and refiled.
The SEC didn’t immediately respond to a request for comment.
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