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Retail investors testified at the securities fraud trial of Andrew Left, pictured right, in Los Angeles.
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Andrew Left, a prominent short-seller, is on trial in Los Angeles for alleged securities fraud.
A retired firefighter testified he lost most of his 401(k) after investing in stocks Left targeted.
Left is accused of manipulating the market, but his defense says he shared his honest opinions.
Federal prosecutors called a witness in the Andrew Left securities fraud trial who might resonate with the jury — a retail investor who said he lost his retirement nest egg by investing in stocks that tanked after being criticized by the famous short-seller.
Billy Banks, a retired firefighter from Texas, testified at Left's trial in a Los Angeles federal court on Thursday. Prosecutors have accused Left, founder of Citron Research and a familiar face on financial TV news shows, of using his prominence to manipulate the market and deceive everyday stock buyers, earning more than $20 million in the process.
Banks said he was working as a firefighter in 2018 when he decided to become more aggressive with his investing. He testified he took about $110,000 that was previously invested in mutual funds in his 401(k) to buy shares in a cannabis company called CV Sciences, with the stock ticker CVSI. Banks said he bought CVSI because he believed the company had great CBD products that "really helped" with stress and pain management.
Banks said he was on vacation with his wife and saw his investment had already sprouted to $190,000. He said he remembered thinking "Oh my god" and being "just so excited."
"It was like I had been watering this plant for weeks, and here it is," he said.
Banks said that shortly after he returned from vacation, Left shared negative comments about the company, and the stock price plummeted. While he still believed in the product, he said he couldn't justify the "beatdown" he was taking as the stock price tanked.
"It was like trying to catch a tiger tail. You couldn't catch up with the thing," he said.
Banks sold his CVSI shares, losing around $80,000 of his initial investment. He took about $30,000 of the remaining funds and invested in another cannabis stock, hoping to recoup some of his losses. This time, he invested in a company called Namaste.
Banks testified he saw Left in a TV appearance in which the short-seller said he believed Namaste's share price would go to zero, and that his reaction was "simply horror."
"When he said he was going to short it to zero, I saw my funds going to zero," he said.
Banks testified that by the time he sold, he had lost around 80% of his investment in Namaste, calling it "devastating."
The defense said Left never recommended anyone buy CVSI or Namaste. They also argued that Left's view on Namaste turned out to be right, and that if Banks had sold all his shares the day Left issued the negative report, he would've lost less money than he did by selling them later.
Another retail investor — the kind the prosecution is accusing Left of targeting — also testified on Thursday. Adam Gray was working as a car salesman in South Dakota in 2018 when he said he began trading and learning about stocks.
Gray said Left was one of the people he'd follow for their perspective, but that he started to see Left's behavior as potentially fraudulent. Gray, who said he was closely following cannabis stocks, said Left was betting long on one cannabis company while sharing negative information about two of its competitors.
"To me, it just seemed off, like that shouldn't be happening," he said.
Gray eventually sent a tip to the Securities and Exchange Commission about Left. It's unclear if that tip sparked the investigation into Left.
Left's defense said his reports about the cannabis companies he criticized were accurate.
The trial is set to continue on Friday.
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