Edward Constantin, more commonly known by his Twitter persona, @MrZackMorris, had it all.
Before he was charged with market manipulation, the 38-year-old was regularly flexing designer watches, expensive cars and screenshots of trading gains to his legion of over half a million Twitter followers. Constantin credited his success to day-trading stocks with a group of like-minded individuals called Atlas Trading, which had over 150,000 members as of early 2021. Other leaders of Atlas included Perry Matlock and John Rybarczyk, who, combined, had over 600,000 Twitter followers. Two other leaders ran a popular investing podcast that acted as an additional stock promotion channel for Atlas.
While living lavish, Constantin also regularly taunted the Securities and Exchange Commission (SEC). To an outsider, it may have seemed like Constantin was an unstoppable force who had mastered the stock market and had decided to give back to the public by posting his trades.
Sec’s most wanted pic.twitter.com/XAoSVyQP1o
— Zack Morris (@MrZackMorris) May 1, 2022
Treat yo self pic.twitter.com/CUYjoBjwRE
— Zack Morris (@MrZackMorris) October 15, 2021
Then, the SEC came knocking.
Last December, the SEC charged Constantin and seven other members of Atlas with market manipulation. The commission noted that the group had reaped illegal profits of about $100 million since at least January 2020.
“The SEC’s action serves as a reminder to investors that they should be wary of advice they encounter online and think twice about their identity and motivations,” said Commonstock CEO David McDonough in an exclusive interview with InvestorPlace. “If not addressed, fraudulent schemes similar to those now going on trial risk causing widespread mistrust amongst self-directed investors. That lack of trust can reduce the demand for equity, with Americans losing out on what has been a great wealth-builder in past decades.”
Atlas’ strategy involved pinpointing a specific stock, often one with low trading volume and market capitalization, buying it, and then advertising it to their hundreds of thousands of loyal followers, which would cause a subsequent spike in price. After that, the leaders of Atlas would allegedly turn around and sell out for a profit without informing their followers. The effects of their sales frequently resulted in their followers “holding the bag.”
Commonstock: Constantin’s Worst Nightmare
On Sept. 1, 2021, Constantin purchased 2 million shares of Camber Energy (NYSEMKT:CEI) at prices between 49 and 51 cents. A few minutes after his purchase, he tweeted out: “$CEI average .51 swinging with @LadeBackk [Stefan Hrvatin] for $2+. Don’t give us crap if it hits $1 and you don’t sell.” By Oct. 5, his position had increased to 2.07 million shares, and his price target had increased to $10 per share.
Following a reiteration of the $10 price target to his followers, Constantin sold out of his entire position at an average price of $2.61, collecting a $4.3 million profit in the process.
This was just one of many instances of alleged fraud by Atlas and its leaders.
All the while, Atlas seemed to be highly cognizant of their alleged crimes. “Get caught? . . . We’re robbing f*cking idiots of their money,” said Atlas leader Daniel Knight in a private conversation that was publicized by the SEC.
The defendants named in the SEC complaint regularly posted their trade entries, but failed to inform their followers of their sales, selling into the artificially created demand. Commonstock CEO David McDonough believes that his platform could have put a stop to the scheme.
Founded in 2017 by McDonough, Commonstock’s mission is to improve the retail investing experience by providing a social platform in which users can directly link their brokerage accounts. As an investor himself, McDonough is a staunch advocate for fair and equal markets.
“Pump and dumps are notorious for not being forthcoming about how much of a stock the promoter already owns, when they bought, and when they start unloading,” said McDonough. “Commonstock data is collected through a direct link to the investor’s portfolio, so there is no way to game it.”
Fintwit Meets Transparent, Verified Trades
Transparency is a central theme for Commonstock. There are thousands of self-proclaimed finance experts on social media, but it is likely that a majority of them aren’t telling the truth when they advertise their “market-beating” and “life-changing” returns.
To verify someone’s claims, Commonstock uses Plaid to securely connect with a user’s brokerage account, revealing percentage returns, trades, and the user’s portfolio. Only the users themselves can see their own cash balances.
“Commonstock shifts the focus to investment credibility through transparency. Broker linking is a core feature of our product and crucial to our philosophy,” said McDonough. “We ask our members to connect their brokerages to their Commonstock accounts, and we show, on a percentage basis, member trades.”
A platform that links to brokers provides several benefits to users. With verified data, users can gauge the reputability and honesty of others. The platform also reveals whether users actually have skin in the game when they discuss stocks online. The combination of these factors creates an extremely transparent platform, which McDonough describes as “something that can enable life-changing relationships to finance, business and economics.”
Finding the Needle in the Haystack
Commonstock also prides itself on its quality of content. Today, with the widespread accessibility of the internet, information is more vast than ever. However, it’s up to individual investors to filter the information for quality and accuracy. McDonough says:
“With Reddit, Discord, and Twitter, we’ve seen some enormously cool movements for retail investors – but we’ve also watched unfounded claims and bad actors grow as well. It’s unfortunate that we’ve seen some individuals abuse the trust of others. But I don’t think online investment communities have to be this way. We want to provide an alternative at Commonstock.”
Ultimately, McDonough’s goal for Commonstock is to democratize finance in an interactive and fun way by providing users with insightful content backed by a verified portfolio. That includes weeding out the real investors from the fake. Others in the investment industry have echoed their support for this goal in the form of funding, including hedge fund managers Philippe Laffont and Bill Ackman.
Today, the platform is still in its growth stage, which means that the Commonstock team is steadily working to improve the user experience. Besides a verified portfolio, Commonstock also provides data on a user’s average holding period and trades per month, as well as a leaderboard of users with the highest returns and the most purchased and sold stocks within the platform.
“Everything we build is in service of this mission,” McDonough said. “More visualization, stepped up charting and data functionality, better portfolio analytics, new content formats, and more is all on the horizon for us.”
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Read More: Penny Stocks — How to Profit Without Getting Scammed
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.