The Unjust Prosecution of Andrew Left (Part 1)

Jun 4, 2026 · 15:25

↗ https://thebearcave.substack.com/p/the-unjust-prosecution-of-andrew

<blockquote>“I think that’s a terrible definition of market manipulation and I would flunk a student who used it as an example.”</blockquote>During the trial of Andrew Left, defense expert Professor Andrew Verstein opined that trading around truthful reports and tweets is not market manipulation because it excludes the heart of manipulation: falsity. Professor Verstein further argued that activist short sellers and market commentators don’t need to disclose their positions and that what makes stock commentators credible is their arguments, evidence, and track record, not their trading.Professor Verstein serves as faculty co-director of the Lowell Milken Institute for Business Law and Policy, specializes in market abuse, and, in April, testified before Congress on “Combatting Fraud and Exploitation in Capital Markets.”Professor Verstsein’s reasoning made sense to me; his credentials were as strong as could be, and I believed his testimony supported a not guilty verdict on the charges of market manipulation.Ultimately, a jury of twelve disagreed and convicted Andrew Left on 13 of 17 charges of market manipulation and securities fraud.I was sad and surprised by the verdict. I’ve known Andrew Left for nearly a decade and consider him equal parts friend, mentor, and personal hero.I have closely followed the activist short landscape since I lost money investing in Valeant Pharmaceuticals my senior year of high school. In college, I interned for short-focused hedge funds and the SEC Enforcement Division, and for the last six years I have authored this newsletter, which involves reading and summarizing nearly every activist short report. I regularly talk with reporters, market participants, activist short sellers, and lawyers in the industry and spent the last two weeks attending the majority of Andrew Left’s trial in person.I believe the prosecution of Andrew Left was unjust, his conviction an incorrect verdict, and his trial one that will have enormous impact on activist short sellers, market commentators, and free speech in our country.The trial of Andrew Left was less a trial of Andrew Left’s actions and more a prosecution of the activist short-selling business model. It was filled with misleading statements, a poor grasp of activist short-selling norms, and a preference for narrative over truth.Take, for example, Mr. Bill Essayli, the First Assistant U.S. Attorney for the Central District of California, whose office criminally prosecuted Andrew Left. After the verdict, Mr. Essayli tweeted, in part:<blockquote>“A Los Angeles federal jury has found Andrew Left guilty of market manipulation. He used media appearances and his company to illegally influence share prices and make quick profits, known as shorting.” (My emphasis)</blockquote><div class="twitter-embed"></div>Mr. Essayli later added, in part:<blockquote>“Short selling is not a crime. Mr. Left was convicted of fraudulently manipulating the market, not for ordinary short selling… Retail investors relied on and invested in positions based on Mr. Left’s representations, to their detriment…There was overwhelming evidence that this was not ordinary trading, but a strategy designed to take quick profits through social media posts motivated by his desire to make a quick buck.” (My emphasis)</blockquote><div class="twitter-embed"></div>The idea that retail investors suffered due to Andrew Left’s conduct was a recurring theme throughout his trial. But is it true?The <a href="https://www.justice.gov/usao-cdca/pr/founder-citron-research-found-guilty-scheming-manipulate-stock-market-media-campaigns">Department of Justice press release</a> retweeted by Attorney Essayli highlights only one manipulative “recommendation” by Andrew Left: a bullish tweet about Nvidia on November 20, 2018. The Department of Justice wrote, in part:<blockquote>“Left took financial positions in Nvidia, including short-dated call options that expired three days later. Short-dated options can offer quick profits if a stock suddenly moves in the narrow timeframe before expiration.Left then promoted Nvidia as a favorable investment on Citron’s Twitter account, stating, ‘Citron buys $NVDA. This is the first time in 2 years stock offers an appealing risk-reward to investors . . . We see $165 before we see $120.’ At the time, Nvidia’s stock was trading at approximately $143.64. The tweet was reported on by major media outlets.”</blockquote>Since then, the stock has risen ~6,000% and has split twice. Which retail investors were harmed by Andrew Left’s bullish tweet on Nvidia in November 2018?This is no isolated incident. At the time of indictment, Sherwood News reviewed the stock tweets and reports that Andrew Left was criminally charged for and found that, on average, the stock picks “<a href="https://sherwood.news/markets/andrew-left-stock-picks-charges/">outperformed the S&P 500 by 3.7x since August 2018</a>.”Investors who relied on Andrew Left for stock picks benefited. Investors who ignored Andrew Left did so to their detriment. In fact, one prosecution witness, retired firefighter Billy Banks, invested in cannabis company Namaste, ignored Citron’s report calling the company a fraud, and lost money, yet still blamed Andrew Left.Andrew Left was right about being bullish on Nvidia in November 2018.Andrew Left was right to tell investors to “back up the sleigh” on Facebook in December 2018.Andrew Left was right to call Namaste a fraud in September 2018.Andrew Left was right when he told the public Tesla was “<a href="https://web.archive.org/web/20190517133248/https:/citronresearch.com/wp-content/uploads/2018/10/Citron-reverses-opinion-on-Tesla-story-too-compelling-to-ignore.pdf">too compelling to ignore</a>” in October 2018.And Andrew Left should have the right to make short-term trades around his own commentary.The jury decided no.What struck me most while attending the trial was how much of the alleged misconduct was simply the industry standard practice of activist short sellers: do research, take a large short-term position, release information to the market, and quickly close part or all of your position.The prosecution called it “trading opposite,” the defense called it “catalyst-based trading,” and Mr. Essayli called it “a strategy designed to take quick profits through social media posts motivated by his desire to make a quick buck.”This practice of short-term trading around reports is common. Often, short activists will also use outside partners, “balance sheet partners,” to trade short-term around short reports and get a cut of the profits.Don’t take my word for it. Simply look at the disclaimers of many prominent short activists, many of which were updated after Andrew Left’s indictment.<blockquote>Muddy Waters Research: “As of the time and date of each report, Muddy Waters (defined below) is short the securities of, or derivatives linked to, the securities of the subject issuer, unless otherwise stated in the report. Upon the publication of each report, we intend to begin covering a substantial majority of our short positions…”</blockquote><blockquote>Wolfpack Research: “You are reading a short-biased opinion piece. Obviously, we will make money if the price of the covered issuer stock declines… Upon the publication of each report, we intend to begin covering a substantial majority of our short positions…”</blockquote><blockquote>NINGI Research: “NINGI Research LLC and NINGI Research LLC Related Persons are likely to immediately transact in the Subject Name’s securities (by increasing and/or decreasing positions and/or risk exposure) …”</blockquote><blockquote>Manatee Research: “Manatee Research and the Manatee Research Affiliates may cover some or all their short positions immediately after the publication of this report or an indefinite period after its publication… by the time you read this report, we may be covering or have already covered our short position…”</blockquote><blockquote>Morpheus Research: “Morpheus Research’s investments are subject to its risk management guidance, which may result in the de-risking of some or all its positions at any time following publication…”</blockquote><blockquote>Grizzly Research: “You should assume that upon publication of any report, we will, or have begun to, close a substantial portion – possibly the entirety – of our positions in the covered issuer’s securities.”</blockquote><blockquote>Fuzzy Panda Research: “Fuzzy Panda and the Fuzzy Panda Affiliates may cover some or all of their short positions immediately after the publication of this report or an indefinite period after its publication.”</blockquote><blockquote>Culper Research: “You should assume that following publication of any research, we are likely to immediately transact in these securities…”</blockquote><blockquote>Hindenburg Research: “Hindenburg’s investments are subject to its risk management guidance, which may result in the derisking of some or all of its positions at any time following publication of any report…”</blockquote>Or take <a href="https://www.kerrisdalecap.com/wp-content/uploads/2024/08/Kerrisdale-Lumen-LUMN.pdf">this August 2024 disclaimer from Kerrisdale</a> following the Andrew Left indictment:<blockquote>“Prior to this complaint, Kerrisdale’s understanding of securities law was that by not releasing false or misleading information in one’s communications and by disclosing to the public that one is long or short a given security, and therefore biased, that there needed to be no restrictions on one’s trading of the covered security… But, in light of this complaint, and following its logic, perhaps it would help investors to just assume the following: assume we have shorted lots and lots of the stock of the Covered Issuer immediately prior to publication, and assume we will buy lots and lots of the stock of the Covered Issuer to cover our short position immediately subsequent to publication…”</blockquote>In sum, nearly all major activist short sellers either explicitly disclose or imply engaging in the short-term trading pattern for which Andrew Left was criminally prosecuted.If the guilty conviction stands, it is an open question whether this trading will be allowed and whether these disclaimers will be sufficient.During the relevant 2018-2020 time period, Citron had both a website disclaimer and a disclaimer included in most reports that disclosed Citron and related persons “may transact” in covered securities post-publication and that Citron has no obligation to update the public on its holdings post-publication.At the time, Citron’s disclaimers were industry standard. In fact, a January 2019 email from John Gerald Martel, Citron’s outside counsel, revealed Citron’s report disclaimer was “based heavily on the Muddy Waters disclaimers,” and Andrew Left later testified his website disclaimer was based on one from TheStreet.com.Among the government’s arguments was that the word “may” in “may transact” was misleading because the government alleged Andrew Left knew he would transact and should disclose he “will transact” rather than “may transact.” In addition, the government noted that Citron’s website’s legal disclaimer page accounted for only 0.22% of the website’s overall views.Beyond ambiguous disclosure standards, all stock commentators are left with a question: how long do you need to hold a stock until you can trade out of your position after expressing a public view?One day?One week?One month?Three months?Until your target price is hit?What if your target price is never hit? Do you need to hold forever?Does it depend on the medium? Are tweets the same as reports? Are CNBC appearances the same as podcast appearances?What if you use a balance sheet partner to trade on your views? What are the restrictions on balance sheet partners, friends, friends of friends, and employees?What if a hedge fund shares a research tip or collaborates with an activist short seller? What restrictions do they have on trading around reports or stock commentary?Can you short-term trade around mainstream news stories where you are a source?What if you don’t know when a story will be published, but you know one is coming?Do trading restrictions only apply to market-moving participants? Credible commentary that moves markets has restrictions, but non-market-moving commentary has none?If the government wants to criminalize trading that it views as inconsistent with public commentary, then it should offer clear guidance to all.Because we have none, our best understanding of the government’s views comes from the trial of Andrew Left.Let me take you into courtroom 8C of the First Street Courthouse in downtown Los Angeles. The Honorable Virginia A. Phillips is presiding, and a dozen lawyers, fourteen jurors, and one defendant sit before her.

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