Short Seller Convicted & Tariff Refunds

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1:40This is Bloomberg Law with June Grosso from Bloomberg Radio. Fame short seller Andrew Left faces the possibility of decades behind bars after a jury found him guilty of using disingenuous social media posts to manipulate stocks. It's a landmark case on market manipulation that threatens to further chill a broader trading strategy loathed by corporate executives. After two days of deliberations, the jury convicted the 55-year-old Left of 13 of 17 counts. He'll be sentenced on August 31st, but as already indicated, he intends to appeal the verdict. Joining me is Bloomberg legal reporter Eric Larson, who's covered the trial.

2:29Eric, tell us about Andrew Left. Who is he and how did he end up on trial? So Andrew Left is one of the most prominent short sellers on Wall Street, and he's been closely watched by his followers and supporters for a long time. He was a big guy on Twitter back in the day and had lots of followers who watched his comments about stocks and companies. And like other activist short sellers, he put out research reports on companies that he was tracking. He was known for that. He had some correct commentary and views that he came out with that lent him some credibility. And again, built up that big Twitter following.

3:05And of course, short sellers make money betting against companies. So a lot of executives maybe don't like them because of what they do. But so a lot of different activist short sellers engaged in this kind of practice, especially back in the years relevant here, which is 2018 to 2023. But the Justice Department started investigating the whole industry and ended up targeting Mr. Left in particular over the specific way that he did his social media commentary and trading, in which, you know, boiling it down, basically said that he was misleading investors, particularly retail investors, about his trading intentions and specifically just trying to manipulate the stocks so that he could do some real quick trades and make some money.

3:53And according to the government, and Mr. Left didn't deny it, over that period of time on the stocks at issue in the case, he made over$20 million in trading profits. What was the prosecution's case? Give us sort of the focus of the prosecution, their most critical evidence. So the case really did hinge on his tweets at the time. That's what they were on the platform then known as Twitter and records of his trading activity. Lots of detailed records and charts about those trades were shown to the jury. And of course, his private communications that the government sees as part of their investigation.

4:29his telegram messages, texts, emails, that sort of thing. And what they did was use all of this evidence to paint a picture of Mr. Left planning in advance, specifically to manipulate the market with a tweet or a research report or both at the same time, and then already prearranging trades in advance so that he could quickly make trades, close out his short or long positions. His long bets were also part of this case. And it showed that he didn't always believe what he was saying, that his primary goal was to get his followers to help move the market so that he could make those trades, which according to the government were often complete opposite of what he was basically saying.

5:11He was saying he was short on a company, but then he would quickly close out his short position after saying that when others started doing the same. So he made his profit. And oftentimes these target prices, he would say, I'm betting this company will go to this price, you know, way down to this price, implying that he was going to hold his short position until that time. But then, of course, closed it out much sooner and again made that quick profit that I mentioned earlier. So now Leff took the rare step of taking the stand, testifying in his own behalf. And trial experts say that when a defendant does that, the whole trial sort of becomes about his or her credibility.

5:51So how did he do on the stand? Well, it was a bit rough. I mean, as you can imagine, the reason that criminal defendants don't often take that risk is because after you get done with your really friendly questioning by your defense lawyer, allowing you to put whatever we could say spin on the evidence in your own words, justify your actions, you're then put up on cross-examination. And it can be pretty brutal. I mean, in this case, the prosecutor went line by line, sort of picking apart a lot of what Mr. Left had said and presenting evidence at that time to show that maybe what he was saying wasn't exactly true.

6:30Confronting him with these communications that undermined a lot of what he was saying. And he came off, you know, not too surprisingly, as pretty defensive at times. The judge had to interrupt him repeatedly to tell him to just answer the question. He didn't want to give the yes or no that the prosecutor was looking for because he wanted to add his own, you know, extra explanation to things. And the judge just kept shutting him down and striking a few of his answers from the record even, which just isn't a great look in front of the jury. So it was pretty rough and clearly it didn't have the impact that he was hoping for because he was found guilty.

7:06He testified that he didn't believe that there was any law that barred him from making trades in the minutes and hours after he published social media posts or research reports. I mean, was that part of the defense case that there's no law against this? Yeah. And you know what? He's right on that. And the government couldn't really claim otherwise. So on the one hand, yes, that's true. But on the other hand, the government was pointing to other evidence that said he was doing more than just trading around his research reports or tweets, that it was a little worse than that. Well, it was fraud, according to the government and the jury.

7:43So it is a really interesting point, though, because that is the chilling effect that Mr. Left and his lawyers have said would hit the short selling industry if he were convicted and actually already hit the industry after he was indicted. So it's hard to say because in effect, we have regulations now in place with this industry via a jury verdict, which isn't normally how regulations are put in place. So maybe we'll see some of those in the future. But all the experts that I've been talking to in the lead up to this trial and earlier today and last night have just been saying that this will have a chilling effect on the industry, an industry that's already, you know, sort of withering and having some tough times because of market considerations.

8:23But, you know, where's the line? That's what people aren't exactly sure. So they're going to be more timid. Yeah, I was going to ask you if this trial, if the verdict showed where the line was between statements of opinion and when it crosses into market manipulation. Yeah, I wish I could answer that, but I really don't think it did. I guess that's the answer. I don't think it really drew a clear line because they're very specific set of circumstances involving a specific individual. And so how do you apply that to everyone else who's doing things a little differently or much differently? And the fear being that because of that uncertainty, maybe you just don't engage in that type of behavior the way that you would.

9:07But, you know, I don't think that any short seller out there would probably say that they're doing exactly the same thing as Mr. Left. The experts that I spoke to before the trial said that they thought this was an uphill battle for the prosecution. So the jury was out two days. They didn't convict him on all the charges. So how did they see it? so right i mean normally if you get a really fast verdict on the first you know just after deliberations then it's probably going to be a guilty verdict and i'm sure that's what the prosecution was hoping for but they did get the guilty verdict they wanted but it spanned two full days of deliberations plus a little extra on the first day and so they clearly were looking at this uh evidence very closely very very closely and at one point they sent a note back to the judge during deliberations, as they often do, and ended up having the court reporter come in and read the entire transcript of a specific witness to them back and forth, the direct examination, the cross-examination, the whole thing.

10:06And it was the testimony of Citron Capital's lawyer, securities lawyer, the one who testified that he had sort of reviewed the trading strategy and didn't see anything illegal about it. It was hard to read the tea leaves on what that meant at the time why they wanted to hear that again. But clearly they determined that even though the lawyer had given the green light to this trading strategy, he actually didn't have all the information about what Mr. Left was up to, which is what was revealed on the cross-examination of that witness. So as far as the four counts that he was found not guilty on, again, I think that would point to how closely they were looking at the evidence on each of those counts.

10:48The first count of securities fraud was the overall overarching fraud scheme. And then counts two through 17 were for individual stocks that he was accused of manipulating. So on four of those, they looked at the evidence that the government had presented and decided that it just didn't quite go as far as the other ones went. We didn't speak to the jurors, so I don't know exactly how that played into it. But I think we can just assume that they looked at the evidence and they couldn't reach unanimity on it. Eric, I always like to hear about some of the colorful events that go on in the courtroom that you might miss reading an article about the trial.

11:25So explain why on the day of the verdict, the judge had threatened to put Left in custody. Right. So yesterday morning, the jury started deliberating at 8 a.m. as they had the day before. And they had that note that I mentioned where they wanted to have that transcript read back to them. and the judge got that note first thing in the morning. And so around 8.39 or so, the judge called the court to session without the jury, yet they were going to be brought in. But when the judge came in, Mr. Left's legal team had to tell him that he wasn't in the building. And so we don't know why he wasn't, if he was late or if he just didn't think he needed to be there that early because it was so unlikely that they would have a verdict by then.

12:12We just don't know. but she was very angry. She threatened to throw him in jail or have him taken into custody rather until a verdict was reached if he did that again and ordered him to remain in the building while the jury is there deliberating. And eventually he did show up. I was actually standing out in the hallway and saw him tearing around the corner in a real rush and ran into court. And she delivered that threat again to him directly once he had arrived. And he apologized. And we don't know why he was late. And we moved on. Well, you don't want the person who's sentencing you angry at you.

12:49So how much time is he actually facing? The government says maximum 25 years on that first main count I mentioned, right? Then 20 years for each of the other ones. Of course, we know that a judge almost always is going to run those concurrent so that the maximum would be 25 years essentially. But then of course, we also know often these sentences are much less than the maximum. So I really can't say he's most likely going to appeal. He certainly hinted at an appeal. You know, you know, they've also asked for a mistrial, by the way, another bit of color. This was the strangest jury verdict delivering I've ever seen.

13:25Once the verdict was reached, everyone came into court. Everyone's, you know, waiting to find out what this verdict is. the jury comes out they say that they've reached a verdict they hand the verdict to the judge who as practiced reads it carefully at her desk and then she calls a sidebar where she wants all the lawyers and mr left to come up around the side of the where she sits and have a private conversation and that has just never seen that before the verdict is about to be delivered and they're talking for a long time. And eventually she reveals that the jury all this time had filled out an incorrect verdict form.

14:09Ouch. Yeah, it was outdated because it included an 18th charge of lying to federal investigators that had been dismissed before the trial. So that's why the left's lawyers requested a mistrial. And the judge said that she would rule on that later. I doubt that you would declare a mistrial over that, although you never really know. Has the defense mentioned any issues it might raise on appeal? I assume that having the wrong jury verdict form will be one of them. I did speak with Mr. Left right outside court after he was sentenced. He did say that this wasn't the end of the story. I think it's pretty clear that he was hinting at an appeal.

14:51We don't know anything about that yet or how quickly that might happen. But it is for him a matter of free speech. He gave a rather lengthy explanation of how he thinks it's going to chill people who want to comment on stocks and trade about it. You know, again, as we discussed before, there's different views about that, exactly what he was doing. But he just clearly sees it as a free speech matter. The Trump administration has dropped a lot of white collar cases that were started in the Biden administration as this one was. Do you have any inkling as to why they kept going on this one? I don't, unfortunately.

15:30I do know that Mr. Left's lawyer made some outreach directly to the administration on this issue and tried to say, hey, you've made it clear your priorities are different. This case should be one that goes away as well. And obviously that outreach was unsuccessful. But in terms of why the government decided to go ahead with this one, it's anyone's guess. I mean, prosecutors really did focus their closing arguments on the notion that Mr. Left was misleading and manipulating and taking advantage of retail investors, you know, average folks. So perhaps that had something to do with the way they looked at the case.

16:12That seems like a good reason for continuing the case. Thanks so much, Eric. That's Bloomberg Legal Reporter Eric Larson.

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18:23Learn more at chase.com slash podcast biz offer. Chase, make more of what's yours. These may apply to Chase Business Complete Checking accounts. The$500 offer is available for new business checking accounts with qualifying activities through June 18th, 2026. Eligibility and qualification requirements must be met. Additional restrictions may apply. Please speak with a business banker for more information. JPMorgan Chase Bank, N.A., member FDIC. The Customs and Border Protection Agency opened a refund portal on April 20th for more than 330 ,000 firms that paid import taxes under President Trump's use of the International Emergency Economic Powers Act, or AEPA.

19:06That signaled that it intended to repay at least some of the approximately$166 billion in levies struck down by the Supreme Court earlier this year. The first batch of payments came quickly, but now legal chaos may be injected into the claims process that's already underway. The Trump administration has filed a notice that it will appeal a court order compelling customs authorities to recalculate all import taxes that the administration collected under IEPA. My guest is trade law expert Timothy Brightbill, a partner at Wiley Ryan. So, Tim, last time we talked about how the refund process was rolling along, how the portal was working.

19:52What happened? Well, we've had a series of very significant developments in the last week for those parties seeking refunds of the tariffs paid under IEPA, the tariffs that were struck down by the Supreme Court. So first of all, last Wednesday, Judge Eaton issued an order asking the Customs and Border Protection and the Justice Department to explain not only the status of refunds being paid, but also calling the Customs and Border Protection Commissioner, Rodney Scott, to testify in court as to the delays in the process. So a very noteworthy escalation of the process. Then two days later, last Friday, Customs and Border Protection responded to Judge Eaton, said that it would be improper to call on Commissioner Scott, who is presidentially nominated and Senate confirmed, to have to appear to answer the court's questions.

21:03And then also, Customs challenged the court order in a way that I think makes it clear that it is going to be difficult for some importers to potentially receive refunds of their duties. So Customs has been paying refunds and has refunded about$85 billion of tariffs or is in the process of refunding those tariffs. But those are tariffs that were never liquidated or finalized. They were always sort of held in suspension and not finalized, and therefore they were still in customs control. The bigger question is for tariffs that were paid on entries that have been liquidated, that have been finalized, and what to do with those.

21:52And in this most recent filing, customs has said it has no authority to reliquidate or refund money without a court order. So what that seems to mean is that for parties that have filed a case in the court, there may be a way to refund the money. But for parties that have not filed cases in the court, Customs claims it does not have the authority to refund money without a court order. So that's a very significant change from this automated system that was moving along. Customs was providing the court with updates, but now there seems to be a roadblock and things seem to be coming to a head. Why do you think this happened?

22:38Do you think that this is really about, you know, the technicality about having filed a lawsuit or not? Or is it a Trump administration attempt not to pay or desire not to pay these tariff refunds? Well, I think it's a combination of both of those factors. First of all, Customs is claiming that it doesn't have any authority under the law to reliquidate duties that have already been finalized unless there is a court order telling them to do so. So the legal reason they're claiming is that they don't have the authority to pay refunds on these entries. Now, I think the practical reason is that there are billions of dollars worth of entries by smaller importers that have not filed suit.

23:24And it's likely that the Trump administration does want to keep that money and doesn't want to refund it. So in effect, that seems to be forcing companies to file lawsuits in order to get their money back. And in fact, we've been recommending to our clients now, we were fairly neutral on this for most of the last year, but a couple of months ago, we started recommending to our clients that if you want to be sure, we think the best course of action is to file a lawsuit at the Court of International Trade. These recent orders seem to confirm that that is the step that many importers will want to think carefully about taking.

24:01It's, of course, an individual company decision based on their own circumstances, but we think that this means it's more likely that more lawsuits will be filed to try and ensure the refunds will happen. That sounds like a lot of lawsuits. Will that clog up the Court of International Trade? Well, the court has handled hundreds and thousands of lawsuits before. There have been prior cases, some involving anti-dumping and countervailing duties, some involving a harbor maintenance tax and other customs provisions. So the court can handle these large cases. I think it would prefer to have customs set up an automated process so that companies don't have to face the burden of filing these individual lawsuits.

24:44But the court can handle it. They've done it before, but it will create a burden for all parties involved. Coming up next, I'll continue this conversation with trade attorney Timothy Brightbill. We'll take a look at some of the other tariffs that President Trump has imposed or will impose. I'm June Grosso, and you're listening to Bloomberg. Support for the show comes from Public. Lately, it feels like there are two types of investing platforms. Some are traditional brokerages that haven't changed much in decades, and others feel less like investing and more like a game. Public is positioned differently.

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