Citron Research employee Ryan Choi settled charges with the SEC, paying more than $1.8 million, for putting out two tweets and trading around them. 

The SEC said on Tuesday Choi “negligently engaged in a scheme to defraud readers of Citron Research in connection with two tweets issued by the platform”. 

The SEC press release says the agency “alleges that in December 2020, Choi worked with Left on the research and content for two buy recommendations that Left issued through Citron Research. According to the complaint, Choi failed to act reasonably by not conducting adequate research or due diligence, which he provided to Left to support the recommendations that Left included in the Citron Research tweets.”

To which we say, if failing to do enough due diligence is a crime, the entire sell side, most CNBC guests and Cathie Wood should all be done for. 

The SEC also alleged that “Choi quickly traded on price increases that came after the two Citron Research tweets, and negligently failed to ensure that this trading activity was adequately disclosed in the tweets.”

As most already know, Citron’s head, Andrew Left, faces charges from both the DOJ and the SEC for securities fraud and has said he’d “never” accept a plea deal.

“This case is going to fail for six independent reasons,” his lawyer said in July. “You have no duty to the market to disclose your private trading intentions.”

Spertus told CNBC that, irrespective of Left’s conviction or acquittal, the case will deter short sellers from publicly sharing their research on companies they believe to be overvalued or whose stock prices are based on false information.

“People will stop sharing their research with the market,” Spertus said. “It’s really bad for the financial markets to have a prosecution like this when the government agrees that the public statements were truthful.”

As we wrote this summer, Federal prosecutors charged short seller Andrew Left with fraud, accusing him of making misleading statements about stocks to profit from price moves triggered by his reports. 

Known for his firm Citron Research, which targets market “lemons,” Left gained fame for betting against Valeant Pharmaceuticals and for betting against GameStop during the meme stock craze, but he has seen less success in recent years.