Andrew Left faces 20 years in prison — but having a correct opinion about a stock shouldn’t be a crime

This past Tuesday afternoon, I rang up Andrew Left, the high-profile short seller long known for meticulously documenting allegations of alleged corporate malfeasance and placing bets against companies like Valeant Pharmaceuticals, Shopify and Chinese real estate giant Evergrande.

“Hey Charlie, I’m at the airport,” Left said as he picked up. “I’m sitting down, having a vodka.”

Given what had transpired just hours earlier, it wasn’t hard to understand the sitting-down-having-a-vodka part. Late Monday night, after a two-week trial, Left was convicted in Los Angeles federal court of 13 counts of securities fraud.

Prosecutors alleged Left circulated his research on social media and financial TV to move a bunch of stocks and make a ton of money. That constituted market manipulation, they said, and got a jury to agree with them.

It sounds to me like what Wall Street does every day — people who “talk their book” — not to mention all the retail trolls you see on X trying to gin up interest in speculative stuff that loses money. Even so, Left now faces 20 years in prison when he is sentenced in ­August.

Truth be told, there’s something unsettling in what Left admits he did: Purposely pushing stock prices around to make a quick buck. Big firms have strict rules around trading off research, placing stocks on so-called restricted lists. Reporters like myself don’t buy individual stocks out of fear our reporting will get us jammed up because we can move prices.

Left, however, was the ultimate day trader with a name and platform that could enhance market gyrations when his research hit the tape. Having an opinion about a stock that turns out to be right — which were the vast majority of Left’s calls through his company, Citron Research — shouldn’t be a crime.

Yes, the trading may look fishy, and this type of trading around ­research reports and public comments has been a legal gray area. Purposely moving stocks can be construed as stock manipulation. Fishy, though, isn’t something that’s supposed to land you in prison for 20 years.

Try telling that to a jury — as Left’s lawyers did. In one day of trading, Left could make more than most of those people earned in a lifetime. It didn’t help that Left made his bones as a short seller. Making money from pushing stocks down in value just doesn’t sit well with most people, even if it means exposing various abuses and is necessary for markets to function properly.

Swaying the jury

“All these people heard from the prosecution is that I worked with hedge funds, that I’m a short seller. that I made two-and-a-half million dollars for one day’s work and they were like whaaat?” Left tells me.

One question is: Do the prosecutors who went after Left understand the law or just want to make short selling de facto illegal? Another: Did they know average people on the jury would buy a weird case because they don’t know much about what the shorts do?

In my career covering finance, I’ve seen some shady short-selling tips, but the vast majority of market upheavals, like the dot-com crash of 2000 or the 2008-2009 financial crisis, have been on the long side — people buying stuff based on irrational exuberance and touts.

Most short selling involves exposing overvalued stocks (Left was famous for unearthing problems at the once high-flying Valeant), irrationally priced securities based on irrational economics (think mortgage-backed securities that led to 2008-2009), or outright sham companies (think Enron).

It was the legendary short seller Jim Chanos who exposed Enron’s house of cards. He made money by “shorting” the stock — borrowing shares of Enron, selling them, and then replacing his borrow when shares tanked — after his research suggested investors were drinking the Kool-Aid.

We probably need short selling now more than ever as stocks continue to reach irrational highs powered by irrational AI valuations.

Yes, I know the lead prosecutor in the Left case came out with a post on X that “short selling is not a crime. Mr. Left was convicted of fraudulently manipulating the market, not for ordinary short selling.”

True. According to the indictment, Left posted that “Citron buys $NVDA. This is the first time in two years [the] stock offers an appealing risk-reward to investors . . . We see $165 before we see $120.” Left’s crime was selling out his position two hours later in the $150-$153 range,

But since that “infamous” trade, shares of Nvidia are up nearly 6,000%.

And short selling really was front and center in the prosecution of Andrew Left, even if he got those calls pretty much right as well. The feds made a big deal out of his profits from shorting a cannabis company named Cronos. It was trading at $11.50 in 2018 when he announced a short-selling price target of $3.50. Again, his crime was selling when his research pushed shares lower and before the price target was hit.

On Friday, shares of Cronos closed at $2.74.