Andrew Left said it was like “taking candy from a baby.” He used those actual words in an August 2018 message to a confidant at a hedge fund, after realizing that retail investors were trading shares of Cronos Group based on commentary he had published under the name Citron Research. When the government indicted him six years later, his defense centered on a simple idea: there was no baby to take candy from.

No one, on this theory, had been parted from anything the fraud statutes protect. The investors who traded on Citron Research’s commentary transacted with an anonymous market, at market prices. They got what they bargained for. All they lacked was information about what Left himself intended to do. And depriving investors of information about his personal trading intentions, Left argued, is not fraud.

This June, two courts nearly three thousand miles apart rejected that proposition within three weeks of each other. On June 1, a federal jury in Los Angeles convicted Left, after a 15-day trial, on one count of participating in a securities fraud scheme and 12 counts of securities fraud, arising from what the government described as a scheme that generated at least $16 million in profits between 2018 and 2023.

Separately, on June 22 this year, Judge P. Kevin Castel of the Southern District of New York denied Steven Gallagher’s motion for a new trial, leaving intact a September 2025 jury verdict finding Gallagher liable to the SEC for fraud and manipulative trading after he touted more than thirty microcap stocks to his Twitter followers while selling into the demand his own posts created—a practice known as scalping—for more than $2.6 million in profits. Final judgment on remedies remains pending.

Neither proceeding turned on whether the defendants were wrong about the stocks they discussed. The government did not set out to prove that Left’s investment theses were false, and the SEC did not need to prove that the stocks Gallagher touted were bad buys. The operative lies were about the speakers themselves: their positions, their intentions, their independence.

Market manipulation enforcement has shifted its object from false statements about underlying companies to false statements by commentators about themselves. Recognizing that shift also clarifies the case law.

In 2024, a Southern District of Texas judge dismissed an indictment against eight social media stock promoters accused of similar conduct, and for a time the decision was read as a rejection of this theory of prosecution altogether. But read closely, it was not.

Every court to consider the issue—including the Texas court—has accepted that concealing your own trading while touting a stock is deception. What divided the courts was a different element: whether investors who buy in an anonymous market at market prices have been deprived of money or property, as the federal fraud statutes in Title 18 require. That narrower question was genuinely contested. It has now been answered.

Two Questions: One Old, and One New

A scalping prosecution must clear two distinct hurdles, and the recent cases make sense only when they are separated. The first is deception: a scalper rarely lies about the company, so the government must locate the fraud in what the speaker said (or omitted) about himself. That question is old, and the answer has been settled for decades.

The second hurdle arises only when the government proceeds under the Title 18 fraud statutes, which require a scheme to obtain money or property. A civil enforcement action under Section 10(b) or Section 17(a) requires deception in connection with a securities transaction, but does not require a scheme to obtain money or property. The Title 18 fraud statutes do. This led to a question: when a scalper’s followers buy in an anonymous market at market prices, has anyone actually been deprived of property? That question briefly divided the courts—and it is the one the Supreme Court has now closed.

The Old Question: Is a Lie About Yourself Actionable?

Scalping is not a new phenomenon. In SEC v. Capital Gains Research Bureau, decided in 1963, the Supreme Court held that an investment adviser who bought stock, recommended it to subscribers, and sold into the resulting rise committed a fraud on his clients by concealing his practice of trading against them, even if the recommendations themselves were sincere. 375 U.S. 180 (1963).

Sixteen years later, in Zweig v. Hearst Corp., the U.S. Court of Appeals for the Ninth Circuit extended the principle beyond advisers, holding that a financial columnist who bought shares at a discount and touted the issuer in print without disclosing his position or his intent to sell could be liable under Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. 594 F.2d 1261 (9th Cir. 1979). It is thus well settled that a market commentator’s undisclosed actions can render otherwise unremarkable commentary materially misleading.

Capital Gains involved an adviser writing to his own subscribers; Zweig, a columnist reaching readers through a newspaper. By contrast, the modern defendants built their audiences through social and mass media. Gallagher accumulated tens of thousands of Twitter followers and touted penny stocks to them directly, while selling.

Left similarly commanded hundreds of thousands of followers and made regular cable news appearances. Now, anyone with enough of a following can move a price.

The two cases map two alternative predicates for fraud prosecutions: omission and affirmative misstatement. Gallagher’s centered on an omission—the harder route, because an omission defrauds only where the speaker had a duty to disclose, and Gallagher was no one’s fiduciary.

Judge Castel, denying Gallagher’s motion to dismiss in 2023, located the duty in the speech itself: having chosen to tweet about the stocks he held, Gallagher assumed a duty to tell the whole truth—including that he was selling the very shares he urged others to buy.

Left’s prosecution centered on affirmative misstatements, and the trial evidence paired Left’s statements with trades in the opposite direction. Left told readers Citron would remain long in one target stock until it reached $65; Left, the SEC alleged, began selling at $28.

Citron tweeted that it was “watching ROKU from the side,” implying Left had no position; in reality Left had shorted Roku that morning and covered within hours of the tweet. And Left presented Citron’s research as independent while concealing that he coordinated with, and was compensated by, hedge funds—arrangements he hid through fabricated invoices and payments routed through a third party.

The New Question—Can an Anonymous Market Be a Victim?

If the deception question was settled, the deprivation question was not. It is here that the defense bar mounted its most serious challenge. The argument runs as follows: Fraud statutes protect money and property. A follower who buys a touted stock buys it on an exchange, from an anonymous counterparty, at the prevailing market price. He receives exactly the shares he paid for. What he lacks is information—knowledge that the person recommending the stock is selling it. And in Ciminelli v. United States, the Supreme Court held that depriving a victim of “valuable economic information needed to make discretionary economic decisions” is not, by itself, a deprivation of property under the federal fraud statutes. 598 U.S. 306 (2023).

The argument found a receptive audience in United States v. Constantinescu. The indictment there charged eight social media promoters with perpetrating a $114 million pump-and-dump. The promoters accumulated a position, touted the stock to followers, and told those followers that they were going to hold the stock, but in reality sold into the surge they created.

In March 2024, Judge Andrew Hanen of the Southern District of Texas dismissed the indictment. The victims, he reasoned, had “surrendered their property to the stock market at market prices” and received the benefit of their bargain; what the scheme deprived them of was truthful information about the defendants’ trading intentions. Any economic harm to followers was incidental to the scheme’s object, which was simply to get rich.

But Judge Hanen did not hold that lying about one’s own position and intent is anything other than deception. The opinion accepted that an intent to deceive was adequately pled.

The defect he identified was the object of the scheme—the deprivation of property, not a lack of deception.

Left pressed the same argument in the Central District of California, in nearly the same words, and lost. The stage appeared set for a genuine conflict over whether the government’s social media manipulation theory was viable.

The Circuit Split That Wasn’t

The conflict never arrived, because the Supreme Court answered the question while the government’s appeal was pending.

In Kousisis v. United States, decided in May 2025, the court held that federal fraud is complete when the defendant induces a victim to part with money or property under materially false pretenses, whether or not the defendant intended to cause the victim economic loss. 605 U.S. 114 (2025). It is now clear that an intent to cause economic loss is not a required element.

On Oct. 2, 2025, the U.S. Court of Appeals for the Fifth Circuit reversed Judge Hanen.

The defendants’ insistence that they meant only to profit, not to injure anyone, was, the panel wrote, “a distinction without a difference”: the object of the scheme was money, and the defendants obtained it “by fraudulently inducing their followers to purchase securities.” That the money arrived through the intermediation of an anonymous exchange rather than hand to hand changed nothing.

So the potential conflict was illusory. The courts agreed that these defendants lied. They disagreed about whether an anonymous market transaction can complete a fraud—a question that was always narrower than the commentary suggested, that arose only under the Title 18 fraud statutes, and that Kousisis resolved.

Gallagher’s case never presented it at all: the SEC proceeded civilly under Section 10(b) of the Securities Exchange Act of 1934 and Section 17(a) of the Securities Act of 1933, which require deception in connection with the purchase or sale of securities and impose no money-or-property object requirement.

Left was charged under both Title 18 and Title 15, so even a Ciminelli-shaped hole in the Title 18 counts would not have sunk the case. Judge Hanen’s dismissal, read in context, was a defensible ruling at a transitional moment in Title 18 doctrine, issued after Ciminelli and before Kousisis. It did not reject scalping liability. But then the law moved under him.

What the Juries Did

Two features of the trial records deserve mention, both cautionary for the government. First, the Left jury acquitted on multiple counts. The mixed verdict suggests jurors were discriminating among episodes rather than condemning the enterprise wholesale. Second, both cases ended in fights about verdict forms.

Left moved for a mistrial after the jury received an outdated form that included a false-statements count dismissed before trial.

Gallagher sought a new trial on the ground that the verdict form improperly consolidated distinct claims; Judge Castel held the objection came too late and that the evidence amply supported the verdict.

The lesson for practitioners on both sides is mundane and important: in multi-count fraud trials built from dozens of discrete publications and trades, the architecture of the verdict form is substantive, and objections to it must be preserved before the jury retires.

Your Word Is Your Bond

These cases do not criminalize short selling, activist research, or being loudly wrong on the internet. Publishing negative research and exiting a position quickly is not, by itself, an offense.

The defense argument that these prosecutions will chill truthful commentary was made in both cases and will be made again on appeal. But the space in which manipulation enforcement now operates has been marked out clearly, and it is not the space most commentators watched.

What matters is whether your published account of yourself—your position, your intention, your independence—matches your order book. In an era when the commentary and the audience are one screen apart, that account has become the instrument that moves the price.

The courts always agreed that lying about it is fraud. Their brief disagreement was about whether anyone was defrauded. That question is now closed.

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This article first appeared in the July 16, 2026, edition of the “New York Law Journal” © 2026 ALM Global Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.