Between all the tweets and trades, timing could turn out to be everything in Andrew Left's securities fraud trial.
A trading expert took the stand for the prosecution on Monday and testified that the prominent short-seller's trading records demonstrated a clear pattern.
"There was a short-term trading strategy in place to take a position ahead of the tweet, to tweet, and then to start closing the position after the tweet has hit the market," said Ross Waller, a former director of trading at Bridgewater Associates, the world's largest hedge fund.
Left, a frequent TV guest with a large social media following, is accused of manipulating the market and deceiving retail investors with his public statements about companies whose stock he was trading.
Over and over again, Waller told the Los Angeles jury, Left would build a bet up a day or so before a tweet, reaching his maximum position around the time of the tweet, and then make a "U-turn" and immediately start offloading the bet.
"He tweets, and it's like flipping a switch," Waller said.
Several graphs displayed for the jury showed Left's trading actions on a stock over a three-day period that surrounded a tweet or report from Citron Research, Left's firm.
Waller testified that Left would often trade counter to the sentiment he expressed in his tweet, sometimes within minutes.
In some cases, Waller said, Left shared a bearish tweet suggesting it was time to bet against a stock, but then would immediately close his short position within a day or so. In other cases, he said, Left would share a bullish tweet and then quickly sell.
Left would also "always" close his position well before the price of the stock reached the target price he had publicized, Waller said.
Left wasn't ordering these trades only after the market reacted to his statements, the witness said.
In some instances, Left would place a limit order — an instruction to buy or sell a stock if it reaches a certain price by a specific point in time — ahead of tweeting.
For XL Fleet Corp, which was trading at around $25, Left in 2020 placed a limit order for $27.50 four minutes before he tweeted about the company with a target price of $60.
Waller said that meant Left said publicly he expected the stock to go to $60 even though he had already placed an order to sell his own shares at a price far below that.
By the morning after the tweet, Left had closed 98% of his position and profited $2.7 million, Waller said.
The trial of Andrew Left
Left's defense has said his public statements contained his honest opinions, but that he also traded on his positions to make money and mitigate risk.
The question of Left's timing also came up earlier on Monday, during the testimony of Anna Hallstrom, a US postal inspector who helped investigate Left. His lawyer, Eric Rosen, questioned how the government could argue there was something illegal about the trades based on timing.
"You're saying effectively he closed his position too quickly?" Left's lawyer, Eric Rosen, asked Hallstrom.
"While at the same time telling people he was still in his position and still holding," Hallstrom replied.
A bit later, Rosen asked, "When does 'immediate' end and regular trading begin?"
"I would say when he stops giving misrepresentations to people about what he's doing," Hallstrom said.
All told, Left made more than $20 million in profits on the trades at issue in the case, prosecutors said.
The defense on Monday also echoed its argument that Left's reports on companies were valuable to retail investors and helped expose potential fraud — arguing that his client was "not targeting retail traders, he is warning them."
"He's warning the retail people they will get burned, correct?" Rosen asked.
"Yes, but he was also making money off them, too," Hallstrom said.
