Feds arrest popular Twitter day trader over alleged 'pump and dump' scheme
A day trader has been arrested and charged for operating a “pump and dump” scheme — on Twitter.
Steven Gallagher, through his Twitter alias@AlexDelarge6553 (named after the fictional character in “A Clockwork Orange”), allegedly touted and encouraged his 70,000 followers to purchase shares in Enzolytics, a Texas-based biotech developing monoclonal antibodies and trading over the counter, among other penny stocks.
As part of the enforcement, the SEC has secured a court order to freeze up to $6.9 million worth of Gallagher’s assets, including stocks currently held in brokerage accounts owned by himself or his wife. An investigation is ongoing.
“As alleged, Steven Gallagher brought old-school boiler room tactics to the Twitter age, and operated a social media pump-and-dump scam that defrauded ordinary investors, all so that he could make over $1 million in profits,” said Damian Williams, the United States Attorney for the Southern District of New York. “Today’s arrest of Gallagher demonstrates that this Office and our law enforcement partners will be vigilant as securities fraud schemes move onto Twitter and other forms of social media.”
According to an unsealed complaint featuring a deposition by Kingston Moy, a special agent with the United States Department of Homeland Security, Homeland Security Investigations, Gallagher lured other retail investors to purchase certain stocks through false and misleading statements in tweets and Twitter direct messages, as well as manipulative trading.
Enzolytics, one of the cases Moy cited, fit into that broader pattern.
As Moy told it, Gallagher was alleged to have bought his first 3 million shares of $ENZC at $0.0007 per share, on or about July 14, 2020. He then kept building a stake until Sept. 16, at which point he held about 7 million shares. Meanwhile, he made sure to let his Twitter followers know about the investment.
On Sep 16, he sold 3 million shares. Not that his Twitter followers would notice: That same day, he sent a series of enthusiastic tweets reminding them of his investment in the biotech, flagging an upcoming merger and encouraging others to “Load!! this!”
One of his multiple tweets that day read: “$enzc Will be #1 on my list do [sic] to this major medical news!! the buyers in the morning will be many!! Alot [sic] less than now!! just satin [sic].”
The tweets kept coming over the next few days, when he tweeted endorsements like: “$enzc still my #1 great run;” “$enzc must own #1;” “$enzc stock of the year!! great start;” and, “This is gonna be a life changer. I heard someome [sic] bought 70 million shares today!! Someone knows what this merger means!!! I do!!”
On Sept. 22, he followed up with tweets calling Enzolytics a “long hold” for him, high on his list and saying it’s “buying time,” when in fact he had already sold almost all of his shares.
Brokerage records and SEC information suggests that Gallagher pocketed around $160,000 in profits from his Enzolytics trading. At least two unnamed victims, however, claimed to have lost thousands of dollars after following Gallagher’s advice.