Twitter User Charged with Securities Fraud
Steven Gallagher, aka “Alex DeLarge” on Twitter, has pleaded guilty to fraud relating to one of the six stocks he was initially accused of hyping, leaving uncertainty about whether a probe into the bigger issue is quietly dying down.
Gallagher, a 51-year-old Maumee, Ohio resident, was arrested on pump-and-dump charges last October, prompting other penny-stock traders on Twitter to point fingers at each other.
DeLarge, who used the Twitter account @AlexDelarge6553, amassed over 70,000 Twitter followers by touting stocks, using the name of a fictional psychopath, the main character of the movie A Clockwork Orange, as his pseudonym.
Federal officials have taken a special interest in stock-pushing on social media since retail traders on the subreddit WallStreetBets powered a surge in the shares of video game retailer GameStop in January 2021.
On Twitter, there is a vocal contingent of users who focus on penny stocks — so named because they are often worth just fractions of a penny — which can be even more volatile.
Gallagher used Twitter to misrepresent the nature of his personal financial stake in the securities of SpectraScience Inc. (SCIE) in order to induce others to purchase SCIE stock, and thereby drive up the price, while he secretly sold the shares, according to the securities fraud charge he pleaded guilty to.
He netted $22,000 from the scheme, which will be forfeited, the government said.
Describing details of the crime, government investigators said Gallagher collaborated with associates, over Twitter DM, to push the stock even though one associate called SCIE a shell with no guts.
Gallagher started buying millions of shares of SCIE in December 2020, the government said.
From Dec. 7, 2020 through the end of January 2021, he posted dozens of tweets touting the stock, even as he started to sell off shares.
After selling off a substantial portion of his SCIE holdings on Jan 28, 2021, he tweeted a screenshot of a buy order for one million shares with the text, “Ok one more mill averaging up! Haven’t sold a share.
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The SEC temporarily halted trading in SCIE over the concern that certain social media accounts may be engaged in a coordinated attempt to artificially influence the share price.
At least two Twitter users lost thousands of dollars in SCIE based on Gallagher’s misleading posts, according to the government.
He is scheduled to be sentenced June 27.
Although he faces a maximum of 20 years in prison, he’s likely to get much less based on typical sentencing practices.
Gallagher still faces a parallel civil suit filed by the SEC over as many as 60 stocks, which he allegedly pumped and dumped to reap a total of $3.4 million.
Unlike the U.S. Department of Justice, the SEC can’t have offenders thrown in prison for securities violations, but it can seek penalties and disgorgement.
His lawyer, Eric Rosen, said Gallagher is fighting those allegations and looks forward to putting this issue behind him, working to make amends to family, friends, and the Twitter community, including continuing to fundraise for the ‘V Foundation’ to find a cure for cancer, a cause near and dear to Mr. Gallagher’s heart.
Rosen stated: “He looks forward to continuing to fundraise for the ‘V Foundation’.
Meanwhile, other Twitter users are still speculating about whether there will be more fallout to come.
A Twitter user ventured in February, referring to other Twitter stock pumpers.
