Zack Morris and Others Cleared of Charges

Zack Morris and Others Cleared of Charges

The SEC charged eight people with manipulating exchange-traded stocks in a $100 million securities fraud scheme. They used social media sites Discord and Twitter for this purpose. The SEC claims that seven defendants have been cultivating hundreds of thousands of followers on Twitter and Discord stock trading chatrooms by portraying themselves as successful traders since at least January 2020. These seven defendants are accused of buying and promoting specific stocks to their large social media following by posting price targets or making it clear that they were adding to, holding, or buying more stock.

Authorities charged these individuals with fraud:

  • Perry Matlock
  • Edward Constantine (Zack Morris)
  • Thomas Cooperman
  • Gary Deel
  • Mitchell Hennessey
  • Stefan Hrvatin
  • John Rybarczyk

As the complaint puts it, the individuals regularly sold their shares without ever disclosing that they intended to dump the securities they were promoting, even as share prices and trading volumes increased in those securities.

Daniel Knight (@DipDeity on Twitter), a Texas resident, faces accusations in the complaint. He is accused of aiding and abetting the purported scheme. He co-hosted a podcast that portrayed participants as knowledgeable traders and gave them a platform for their deceptive remarks. Along with the other defendants, Knight traded and profited from the manipulation regularly.

In addition to requesting a penny stock bar against Hrvatin, the SEC has filed a complaint in the U.S. District Court for the Southern District of Texas, seeking permanent injunctions, disgorgement, prejudgment interest, and civil penalties against each defendant. The Southern District of Texas U.S. Attorney’s Office and the Department of Justice’s Fraud Section filed criminal charges against all eight people in a related case.

SEC Dropped Charges Against Zack Morris and Other Influencers

The SEC and Justice Department had accused seven influencers of running a “stock manipulation scheme” on Discord and Twitter. However, a federal judge has thrown out all the charges against them.

In a case alleging securities fraud, U.S. District Judge Andrew S. Hanen of the District Court for the Southern District of Texas ruled on March 20 that the government had not proven its case and dismissed all charges against the defendants. The government’s case argued the defendants committed securities fraud by disclosing stock ownership and justifications on social media. Still, they should have mentioned when they planned to sell them. Hanen ruled defendants did not mislead investors or illegally deprive them of money, rejecting the claim that it was illegal.

The SEC and Justice Department filed charges against the influencers in December 2022, alleging that they had posted price targets or indicated that they were purchasing, holding, or increasing their stock positions, encouraging their “substantial social media followings” to purchase stocks. However, they “regularly sold their shares without ever disclosing their plans to dump the securities while promoting them.”