When Jordan Belfort ruled the stock hustling scene in the early 1990s, pushing penny stocks required a veneer of respectability.
Stock peddlers had to get offices, secretaries, regulatory licenses, and business cards to convince people to sink their life savings into questionable companies. Hence, why Belfort built Long Island-based brokerage Stratton Oakmont.
In the age of social media, the barriers to entry are much lower. All it takes is the persona of a sitcom character, a swaggering attitude, financial podcasters as friends, and photos of yourself with a Ferrari, and you can lead thousands of fools into shady stocks like the Pied Piper commanding a multitude of rats.
Or at least that’s what worked for “Zack Morris.”
“@MrZackMorris,” as he is known on X, is a Houston-based day trader around 40 years old named Eddie Constantinescu — or “Eddie Constantin” for short. With 529,000 followers, he’s one of the most popular personalities on FinTwit, a community of mostly amateur investors on X, FKA “Twitter.”
He along with seven other online stock-picking gurus, including the aforementioned podcasters, were arrested and charged with a $114 million securities fraud scheme in December 2022. Then a little more than a year later — despite massive amounts of public evidence indicating they had “pumped and dumped” stock — the case was dismissed, much to the shock of onlookers. I’m going to tell you why that happened.
First, a little background on the protagonist: Not many digital traces of Constantinescu’s origins can be found on the internet. But what exists shows the familiar “rags to riches” Horatio Alger arc (see this chapter of my memoir SMIRK for more on that variety of myth) so often found in the type of person I’m labeling a “Black Sheep” on this Substack.
On Pennies: Going In Raw, the podcast run by his co-indicted friends, Constantinescu explained he was a Romanian immigrant who grew up in New York City. His father was a cab driver and his mother was a hairstylist. His parents sent him to a private Catholic school, where Constantinescu claimed he was bullied by wealthier students and came to see little value in formal education. (“School doesn’t teach you how to make money,” he remarked.)
Eventually, Constantinescu dropped out and obtained a GED. He took a few college classes and worked for about a decade “part-time” at T-Mobile. Lured by a booming housing market in Texas, he moved to Houston where he got a job with a homebuilder. He told his podcaster friends he made $200,000 a year there.
By the mid-2010s, however, he had changed course and gotten into stock trading. Constantinescu said he was successful enough at playing the market to quit his day job. He eventually co-founded his own chat rooms, including Atlas Trading, a Discord-based forum that amassed more than 150,000 members. He nurtured his following on X, posting photos of an increasingly lavish lifestyle — purchases of expensive cars, luxury watches, and his 10,500 square-foot lakefront mansion.
Constantinescu insisted during his interviews and on his X account that he shared his trading strategies and stock tips out of a sincere desire to spread the wealth, and not to take advantage of his flock. Along with being a big spender, he claimed to also be generous — always taking “a few grand” in cash with him and doling out hefty portions to waiters and Uber drivers, along with handing out money to homeless people on the street.
All of the items he conspicuously consumed were unimportant, he said. Instead, he valued his wife, his family, and his dog.
“It’s really about family, your close friends,” he told the podcasters. “When you die what are you doing to do with this stuff? It’s just stuff.”
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Needless to say, the Feds had a different impression of “Zack.”
In a 12-count indictment, authorities alleged Constantinescu and seven other FinTwit personalities including ‘Pennies” podcasters Mitchell Hennessey and Daniel Knight “used their social media influence to pump and dump securities for their own financial gain.” They were accused of running a version of one of the oldest manipulation tricks in the book: Recommending stocks to drive up the price and then selling at the peak while convincing their followers to hang on.
Combined, the group had about 1.5 million followers on X and they reaped about $114 million in gains from January 2020 through April 2022, according to the Department of Justice. Constantinescu accounted for both the lion’s share of the following and the illicit profits, prosecutors alleged. The scale of the alleged scam was impressively massive. By comparison, Belfort’s exploits — deemed significant enough to warrant a Leonardo DiCaprio movie — cost investors about $200 million.
Constantinescu and the rest of the group sometimes “lied about losing money on a particular stock when in reality they had profited handsomely, in order to generate trust among their followers,” the U.S. Securities and Exchange Commission alleged in a related civil suit. (The SEC often coordinates with DOJ on securities fraud cases.)
“Indeed, in private chats and surreptitiously recorded conversations, they bragged and laughed about making profits at the expense of their followers,” the agency noted. Indeed, Knight even allegedly told his fellow traders “We’re robbing f*cking idiots of their money.”
Although Constantinescu and others in the group proclaimed publicly that they would never “dump” on their followers, their actions showed otherwise, according to the SEC. For example, Constantinescu and others purchased and began promoting shares of over-the-counter stock Camber Energy in September and October 2021.
The deepest pockets in the crew, Constantinescu bought about 2 million shares for $1 million, or about 50 cents per share. For a month, he tweeted increasingly ambitious expectations for the stock — first claiming a target of $3-$5 per share, and then raising his purported target to $10. He encouraged his followers with tweets like “Too many of you act like little bitches when there’s dips. It’s all part of the game.”
On Oct. 5, 2021, just a half hour after reiterating to his followers that he expected the stock to rise to $10 per share, he sold all of his holdings for $2.61 per share, according to the SEC. More than quintupling his investment, he made $4.3 million in profits, the agency alleged.
Camber Energy now trades at just 2 cents a share.
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Constantinescu has acknowledged that he engaged in a practice known as “scalping,” or taking advantage of small movements in the price of stocks to earn quick short-term gains. Fundamentals and business expectations are largely irrelevant to scalpers; they mostly pay attention to patterns in how prices tend to shift throughout the day, otherwise known as “technical analysis.”
Because trading patterns do tend to be somewhat predictable (markets, after all, behave like a super-organism), scalping can seem like easy money. But there are at least two important downsides: First of all, transaction fees from making many small trades can quickly erode profits. Second, high-frequency trading algorithms commonly used by large firms can identify and exploit scalping opportunities much more efficiently than humans.
Robinhood, the scallywag online broker known for ultra-low fees, helped to reduce the first problem. During the Covid pandemic, with so many people bored and stuck at home in lockdown, the broker gave rise to an unprecedented wave of retail trading that also helped to lift “Zack Morris” & Co. But the second problem, a lack of consistent scalping “plays” for human traders, likely persisted.
Of course, a person with a huge social media following could easily solve that problem, too, by providing tips and stirring up trading activity. The issue then becomes avoiding being caught (marketing manipulation is generally illegal), or somehow slipping out of the authorities’ grasp.
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A few weeks after Constantinescu’s Camber Energy score, the Feds started cracking down on online stock husters. As the former editor of The Business of Business, I wrote about the arrest of another character in that world, an Ohio-based online stock pusher Steven Gallagher, who went by the name Alex DeLarge (from “A Clockwork Orange”). Cheekily, I asked who was “next,” and mentioned rumors that “Zack Morris” was also being probed.
“See you next Tuesday,” Constantinescu tweeted at me (he was spelling out “c*nt”) and he promptly blocked me.
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Shooting the messenger didn’t help matters for him, though. The rumor was true.
As soon as the indictment was unsealed, internet forums were rife with chatter about how obvious the scam was and how likely Constantinescu and other traders were to end up with lengthy prison sentences. “I mean seriously, they should have been caught much sooner than this,” a user commented on Reddit’s r/WallStreetBets.
They were arraigned and released on bail, with a provision specifying that Constantinescu was to stay off social media and “not communicate with others about trading positions.” While one of the podcasters, Knight, pleaded guilty, the rest of the defendants dug in for a fight. They filed numerous motions, demands for evidence to be turned over, and multiple requests to dismiss the indictment.
Defense lawyers often try to poke holes in the Feds’ cases and request dismissals based on errors, inappropriate procedures, and legal precedents. Their requests are rarely granted, especially in securities fraud cases — where prosecutors have a 90% + conviction rate. However, not unlike his online persona’s namesake having been “Saved By the Bell,” Constantinescu and his friends found a surprising path to escape. It was carved for them by Clarence Thomas.
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Among the slew of other conservative rulings by the Supreme Court as of late, Thomas authored a 2023 decision in Ciminelli v. United States which narrowed the basis for bringing wire fraud charges. The justices found that prosecutors needed to show an intent to deprive a victim of money, not just the right to control “discretionary economic decisions.”
George W. Bush-appointee Andrew S. Hanen, the Houston federal judge overseeing the online stock pushers’ case, extended the logic to securities fraud. Without taking issue with any of the prosecutors’ allegations — that “Zack Morris” and Co. profited by lying to their followers and “pumping and dumping” — the judge found the criminal charges no longer fit the scheme.
Hanen wrote:
Even accepting as true that the alleged victims ultimately lost money on the stock market because the value of their shares went down, the defendants did not obtain something of value from the entity to be deceived. The investors’ trading losses are one step too far removed from the Defendants’ alleged fraudulent misrepresentation. Instead, the property right of the investors that the defendants’ conduct harmed was their right to control assets, or stated another way, was their right to make an informed discretionary decision.
Hanen dismissed the case. The bail money was returned. Constantinescu and his fellow pumpers returned triumphantly to the internet.
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Their victory might be short-lived, though. After all, even a conservative-majority Supreme Court probably would not give carte blanche to “pump and dump” schemes.
Calling Hanen’s ruling “novel and legally unsupported,” prosecutors swiftly appealed to the Fifth Circuit for a reversal. They argued:
If the district court’s understanding of the law were correct…prosecutions of pump-and-dump and other market-manipulation fraud schemes would generally be called into question. Such a revolutionary decision would be contrary to courts’ and commentators’ well-settled understanding.
The parties are still currently filing briefs and arguments have not yet been scheduled. I imagine we’ll have a ruling, though, within the next year.
Meanwhile “Zack” is back to doing his thing, talking up stocks and posting memes and gifs on X. He also launched a new Discord-based trading chat room: the “F.U. Money Club.”
How “Zack Morris” Beat the Feds