Atlas Trading Lawsuit: Dismissal, Fifth Circuit Reversal, and SEC Case

The Atlas Trading lawsuit is a pair of federal cases — one criminal, one civil — brought in December 2022 against eight social media stock influencers accused of running a pump-and-dump scheme through a Discord community called Atlas Trading that allegedly generated roughly $100 million in illicit profits. A federal judge in Houston threw out the criminal indictment in March 2024, but the Fifth Circuit revived it in October 2025 after a Supreme Court ruling reshaped federal fraud law. Trial is now scheduled for May 3, 2027.

Who Was Charged

On December 13, 2022, the Department of Justice filed a criminal indictment and the Securities and Exchange Commission filed a civil complaint in the U.S. District Court for the Southern District of Texas naming the same eight defendants.¹²

Seven were charged as primary participants: Edward Constantin (“MrZackMorris”), Perry Matlock (“PJ Matlock”), Thomas Cooperman (“Tommy Coops”), Gary Deel (“Mystic Mac”), Mitchell Hennessey (“Hugh Henne”), Stefan Hrvatin (“LadeBackk”), and John Rybarczyk (“Ultra Calls”). An eighth, Daniel Knight (“Deity of Dips”), was charged with aiding and abetting.²

All eight were charged with conspiracy to commit securities fraud. Individual securities fraud counts ran from two to five per defendant, with Constantin also facing a count of engaging in monetary transactions derived from unlawful activity. The maximum potential sentence is 25 years in prison.³⁴

How the Alleged Scheme Worked

Atlas Trading was a free Discord server founded in 2018 by Matlock and Constantin. It marketed itself as an educational space for beginning traders, and by early 2021 the SEC put its membership above 150,000, with press reports citing figures above 230,000.¹⁵ The defendants built followings by posting about luxury lifestyles and trading profits within a Twitter subculture known as “FinTwit.”

Prosecutors and the SEC allege that from at least January 2020 through December 2022, the defendants used the community to run a coordinated pump-and-dump operation in three stages. They would quietly buy large positions in a target stock at low prices. They would then promote the stock to followers on Discord, Twitter, and podcasts, posting price targets and claiming they were holding or adding to their positions. As followers bought in and prices rose, the defendants sold into the inflated demand, often denying they were selling and deleting messages afterward.¹

Stocks the SEC identified as targets included Camber Energy (CEI), GTT Communications (GTT), ABVC Biopharma (ABVC), American Resources Corp. (AREC), and FDS Pharma (HUGE). The SEC alleged the defendants repeatedly told followers they were not “pumping and dumping” and, in private messages, described the operation in far blunter terms — one defendant referred to “rob[bing] f*cking idiots of their money.”¹

The 2024 Dismissal

On March 20, 2024, U.S. District Judge Andrew S. Hanen dismissed the criminal indictment against all defendants, ruling that the government “failed to state an offense.”⁶ His reasoning turned on the Supreme Court’s 2023 decision in Ciminelli v. United States, which struck down the “right-to-control” theory of wire fraud — the idea that depriving someone of economically valuable information counts as fraud even without traditional property changing hands.⁷

Judge Hanen concluded that the indictment, at most, alleged the defendants deprived their followers of “full and honest investing information” rather than taking their money or property directly. Investors, he wrote, “surrendered their property to the stock market at market prices” and received securities in return, getting the “benefit of their bargain.” Any losses were “incidental” to the scheme rather than its object. He acknowledged evidence of intent to defraud but held that intent alone did not establish a viable “scheme to defraud” under the law as read after Ciminelli.⁸⁷

The Appeal and the Fifth Circuit Reversal

The DOJ appealed to the Fifth Circuit, arguing that Judge Hanen had misread the indictment and misapplied Ciminelli. The government’s position was that the scheme targeted money, “the most traditional property interest of all,” and that fraud does not require money to flow directly from a victim into a defendant’s hands.⁸

Both sides then agreed to pause the appeal. The Supreme Court had taken up Kousisis v. United States, which both sides said could have “significant ramifications” for the Atlas Trading case. The Fifth Circuit stayed the appeal on October 22, 2024.⁹

On May 22, 2025, the Supreme Court unanimously decided Kousisis for the government. Federal wire fraud, the Court held, does not require the victim to suffer a net economic loss. A defendant who induces a transaction through material lies can be convicted even if the victim receives something of value in return. The primary safeguard is materiality: the lie must go to the essence of the bargain.¹⁰¹¹

With Kousisis decided, the Fifth Circuit moved fast. On October 2, 2025, a three-judge panel led by Circuit Judge Kurt D. Engelhardt reversed the dismissal and sent the case back to Houston for trial.¹² The seven-page opinion held that the indictment did not rest on a “right-to-control” theory but on a straightforward fraudulent-inducement theory: the defendants used material lies to trick followers into buying stocks so the defendants could sell at inflated prices. Under Kousisis, that was enough to allege a scheme to defraud under 18 U.S.C. § 1348.¹³

The panel rejected two defense arguments. It refused to require “direct tracing of proceeds” from victims to defendants, writing that money and shares are fungible and that “securities fraud is still securities fraud, even when the money flows through the black box that is the public securities markets.” It also brushed aside the claim that the defendants merely intended to enrich themselves rather than harm investors, calling that “a distinction without a difference.”¹⁴⁴

The Parallel SEC Civil Case

The SEC’s civil action, filed the same day as the indictment, names the same eight defendants and alleges roughly $100 million in illicit profits. The agency is seeking permanent injunctions, disgorgement plus interest, and civil monetary penalties, along with a penny stock bar against Hrvatin.¹¹⁵ As of the criminal dismissal in early 2024, the civil case was reported to be on hold; its current procedural status has not been detailed in available reporting.⁷

Where the Case Stands Now

Daniel Knight pleaded guilty to securities fraud on March 27, 2023, before the indictment was dismissed as to the others.¹⁶⁶

The other seven — Constantin, Matlock, Rybarczyk, Deel, Hrvatin, Cooperman, and Hennessey — have all pleaded not guilty. Following the Fifth Circuit’s October 2025 remand, trial is set for May 3, 2027, in the Southern District of Texas.¹⁶

1
SEC. SEC Complaint, Constantinescu et al.
2
CNBC. SEC Charges Social Media Influencers in Alleged $100 Million Fraud Scheme
3
Fox Business. DOJ Alleges 8 Americans Used Social Media to Make $114M in Pump-and-Dump Investment Scheme
4
Yahoo Finance. Appeals Court Revives Houston Traders Case
5
The New York Times. SEC Charges Influencers With $100 Million Fraud Scheme
6
Variety. Securities Fraud Charges Dropped Against Social Media Influencers
7
CNN. Social Media Pump and Dump Discord Twitter
8
Fifth Circuit Court of Appeals. Government’s Opening Brief, United States v. Constantinescu
9
Dynamis LLP. Atlas Trading Update
10
Justia. Kousisis v. United States
11
SCOTUSblog. Federal Fraud After Kousisis
12
Fifth Circuit Court of Appeals. United States v. Constantinescu, No. 24-20143
13
Columbia Law School Blue Sky Blog. Quinn Emanuel Discusses Fifth Circuit Decision Reinstating Securities Fraud Indictment
14
Securities Docket. Pump and Dumps Aren’t Legal After All
15
SEC. SEC Press Release 2022-221
16
Department of Justice. United States v. Constantinescu et al.