"Twitter Stock Pumper Avoids Prison For Microcap Fraud"

Steven Gallagher, a 51-year-old day trader from Ohio, recently avoided prison time for his role in a Twitter-based pump-and-dump scheme targeting microcap stock SpectraScience Inc. Gallagher used his social media platform to artificially inflate the share price of the shell company, reaping $22,000 in illicit profits. He was sentenced to six months of house arrest, followed by supervised release, and was fined $10,000.

The scheme began in late 2020, when Gallagher, operating under a Twitter handle inspired by a character from *A Clockwork Orange*, promoted SCIE stock while holding 26 million shares. By falsely assuring his followers he was not selling his shares, Gallagher manipulated the stock price to soar by 300%. Once the price peaked, he sold off his shares for profit, leaving his followers with worthless stock.

Prosecutors sought a prison sentence of 8 to 14 months, arguing the crime stemmed from greed, not necessity. Assistant U.S. Attorney Richard Cooper labeled it a "crime of opportunity." However, Gallagher's lawyer, Eric Rosen of Roche Freedman LLP, now a partner at Dynamis LLP, highlighted Gallagher’s charitable contributions and professional background, arguing that the SEC's asset freezes and public backlash had already served as significant deterrents.

Judge Valerie Caproni acknowledged the deplorable nature of the crime, noting the amplifying role of social media in facilitating such schemes. However, she described it as a relatively minor fraud compared to other cases.

Eric Rosen emphasized Gallagher's acceptance of the court’s judgment and his commitment to moving forward. He argued that bringing charges in such cases serves as a strong deterrent, even without harsh sentences. The case underscores how social media can supercharge fraud while raising questions about the effectiveness of deterrence in the digital age.