Short-Seller Andrew Left Pleads Not Guilty to Fraud Charges

(Bloomberg) -- Famed short-seller Andrew Left pleaded not guilty to US charges that he committed fraud, setting the stage for a high-profile legal battle over his strategies.

Left on Monday made his first appearance in federal court in Los Angeles since being charged last week by the Justice Department. Prosecutors allege Left manipulated the market to benefit his trading and made false statements to investigators. If convicted, he could face decades behind bars.

During a hearing that lasted about 40 minutes, Magistrate Judge Rozella Oliver imposed a $4 million unsecured bond and a $1 million collateralized bond, which was less than the government sought. She gave him until Aug. 5 to come up with the $1 million. 

While he awaits trial, Left is also prevented from making many financial transactions of more than $100,000 without special permission and his trading activity was restricted. His trial date was set for Sept. 24 and he was ordered to surrender his passport.

Over the years, Left gained prominence among the cadre of investors who specialize in betting against specific stocks. But prosecutors now say he used his influence and the platform, Citron Research, to steer trading in ways that improperly benefited his own positions. 

The Justice Department said Left would create a false perception that his public comments on a stock were in line with his trading activity. Left would also at times quickly close positions after releasing a research report or making comments, according to prosecutors. That would let him take advantage of short-term price movements.

James Spertus, Left’s lawyer, said last Friday that the government’s case against client was “defective,” and that Left had no duty to disclose his personal trading intentions. He added that the government wasn’t accusing Left of publishing false information.

The case against Left stems from a wide-ranging US effort to examine relationships between hedge funds and skeptical researchers. Left’s prosecution is already being used as fodder by critics of the industry.

Separately, the US Securities and Exchange Commission sued Left over alleged violations of the law on Friday in a civil complaint.

(Updates with hearing details beginning in third paragraph.)

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