On Tuesday, the US Securities Exchange Commission (SEC) filed a lawsuit in the US District Court for the Southern District of Texas against the following eight defendants:
Edward Constantin aka MrZackMorris aka Edward Constantinescu
Perry Matlock aka PJ Matlock
Thomas Cooperman aka Tommy Coops
Gary Deel aka Mystic Mac
Mitchell Hennessey aka Hugh Henne
Stefan Hrvatin aka Ladebackk
Daniel Knight aka Deity of Dips
John Rybarcyzk aka Ultra Calls aka The Stock Sniper
A note on those Twitter screen captures: I took them Wednesday morning (December 14). Twitter shows me anyone I follow who also follows these accounts, so I know that John Brda, the former Torchlight CEO who hung around to advise Meta Materials on the disposal of its oil and gas assets, follows four of them; and Meta founder and CEO George Palikaras follows two of them.
(Unrelatedly, but amusingly, Harjinder Singh Kukreja, owner of the London, Ontario shop where Conservative leader Pierre Poilievre buys his shawarma with Bitcoin follows six of them.)
The SEC complaint reads:
To their legions of followers on social media, the eight defendants have, for years, promoted themselves as trustworthy stock-picking gurus. In reality, they are seasoned stock manipulators. They identify stocks ripe for manipulations, acquire substantial positions in thee securities, and then recommend those stocks as good investments to their followers on Twitter, in online stock-trading forums they run, and on podcasts. They encourage their followers to purchase the selected stocks, often claiming that they likewise have bought or intend to buy these stocks for themselves and hold them. Instead, the defendants sell their shares into the demand that their deceptive promotions generate…
From at least January 2020 through present…the eight Defendants earned approximately $100 million from this stock manipulation scheme.
As evidence the defendants knew what they were up to—and that it was illegal—the SEC provides excerpts from “surreptitiously recorded” (they don’t say by whom) calls on their Discord servers. (Discord is a platform that allows people to connect via voice, video or text messaging. Constantin and Matlock were co-founders of a stock-trading forum on Discord called Atlas Trading.) On 24 February 2021, Knight—who co-hosts the Pennies: Going in Raw (PGIR) podcast with Hennessey—was recorded saying:
[The less] I mention a stock, the less likely I get involved whenever all of Atlas gets a class action f*cking lawsuit…I’m playing this extremely smart , for the very long term. If you don’t think all these f*uckers go to jail or at least get sued, you are crazy…playing stupid does not work in court…it’s market manipulation…I mean, you look up the definition of market manipulation…
But, you’re asking, what has this got to do with us here in Nova Scotia?
I’m so glad you asked.
Riding the unicorn
The SEC illustrates its allegations, none of which, obviously, has been tested in court, with five examples of stocks it claims the group manipulated and exhibit D is Torchlight Energy Resources, the company that entered a reverse takeover with Meta Materials in 2021, resulting in Innovacorp’s $100 million payday.
According to the SEC, Hennessey identified Torchlight as a “selected stock” on or about 9 February 2021 and on February 10, purchased 196,019 Torchlight shares. That same day, Matlock purchased 383,421 shares, Deel 210,000 and Knight 8,562.
The SEC says Hennessey promoted the benefit of Torchlight’s merger with Meta Materials, talking up the dividend Torchlight investors were to receive and claiming that Meta was not only “potentially partnering with Tesla” but that it had products that had applications for fighting COVID-19 and thus a “10 billion dollar MARKET CAP POTENTIAL.” (Both Palikaras and Brda follow Hennessey on Twitter.)
While promoting the stock, the SEC says Hennessey and the others were simultaneously dumping their holdings (sometimes only to load up and dump all over again.) The lawsuit claims that between 1 February and 23 February 2021, Hennessey earned $288,603 on his Torchlight stock; Matlock, $336,138; Deel $148, 131; and Knight $2,757.
Constantin, Matlock, Cooperman, Deel, Hennessey, Hrvatin and Rybarcyczk face allegations of fraud in connection with the purchase or sale of securities, while Knight faces allegations of aiding and abetting them.
The SEC is asking the court for a permanent injunction against all eight defendants, enjoining them from “engaging in transactions, acts, practices, and courses of business of the type alleged in this Complaint;” “disgorgement” of their ill-gotten gains (with interest); and payment of civil monetary penalties. In Hrvatin’s case, the SEC is asking the court to bar him from “participating in any offering of a penny stock.”
Reading about the defendants—and seeing their selfies with expensive sports cars—has at least helped me understand why the retail investors these guys are (allegedly) fleecing are so passionate about stocks like Torchlight. They believe these traders are on the up and up—that they have become millionaires based on their stock-picking savvy and are generous enough to share their tips with the plebs who follow them.
It all sounds too good to believe…and you know what that means.
I can’t say whether this lawsuit has any connection to the SEC investigation cited by Meta Materials in its SEC filings, but Meta did say the SEC was looking into the Torchlight merger, and that it continues to cooperate with the regulator.
I also can’t say if these influencers made money on Torchlight at the time of its merger with Meta—i.e. at the time Innovacorp made its money—but it’s certainly a question worth asking.
gov.uscourts.txsd.1899118.1.0
