3408: Trading Games by Nick Maggiulli of Of Dollars and Data on Smart Trading Strategy

This is Optimal Finance Daily trading games by Nick Maggiulli of of dollars and data.com. This week, the SEC filed suit against eight financial influencers from Atlas Trading, an online stock picking community, for manipulating their social media followers into buying and selling stocks for their own personal gain. The suit explains how their scheme worked. Quote, they identify stocks ripe for manipulation, acquire substantial positions in these securities, and then recommend those stocks as good investments to their followers on Twitter, in online stock trading forums they run, and on podcasts. They encourage their followers to purchase the selected stocks, often claiming that they likewise have bought or intend to buy these stocks for themselves and hold them. Instead, the defendants sell their shares into the demand that their deceptive promotions generate. Since January 2020, the influencers earned approximately $100,000,000 from their illicit trading activities, making it one of the largest pump and dump schemes in American history. Alex Good wrote an incredible thread providing details on exactly what these influencers did and why you should avoid these kinds of behaviors. He concluded, quote, a, don't use followers as exit liquidity, b, don't collude or provide early signals to friends, c, don't discuss the materiality of your statements to price action privately or publicly. D. Don't flex or entice others to do your trades. E. Don't lie. End quote. If I could, I'd add don't get cocky to the list as well, because in light of the lawsuit, every brash thing these guys ever said is coming back to haunt them. In particular, Zack Morris, the ringleader at Atlas Trading, had quite a few tweets that made him look very bad in retrospect. He frequently joked about getting caught by the SEC, and he even tweeted, quote, the movie will be sweet, end quote, in reference to the lawsuit filed against him. Morris has since deleted the tweet. I'm guessing he didn't like the ending to the movie. Jokes aside, this behavior doesn't really surprise me. Because the kind of people that make tens of millions of dollars by lying to their followers are the same kind of people that think they can't outwit the SEC. It's almost true by definition. Think about it. If you're making millions of dollars in such a short period through trading, you're either, one, insanely lucky, or, two, willing to take extreme actions, such as breaking the law, borrowing heavily, etcetera, to get there. I could apply the same logic to Jason DeBolt, everyone's favorite all in Tesla investor. 100% of his portfolio is in Tesla stock. Of course, what Jason is doing isn't illegal, but it's similarly extreme. Last week, DeBolt tweeted that he was down $11,000,000 on his Tesla position, and he was considering selling his house to buy more Tesla shares. Well, guess what? This week, he announced that he's following through. DeBolt will soon be without a home, but will have many more Tesla shares as a result. If …