Nate Anderson, the activist short-seller who runs the firm Hindenburg Research, is in the crosshairs a s his firm gears up for shutdown after almost eight years of operating. Newly produced filings have gathered doubts as to the connection that Anderson’s firm might have with hedge funds, especially when preparing reports that focused on the Companies. Such reports, as the story was covered in a Canadian news source, may have involved work with Anson Funds is a Canadian based hedge fund headed by Moez Kassam.
Details of the allegations emerged in a bundle of filings within the Ontario Superior Court of Justice in a defamation case. From the statement of Kassam, Anson was disclosed to have forwarded information regarding researches of all these sources including Anderson’s Hindenburg. Looking at the documents filed in the case, there is reasonable evidence that suggest that Hindenburg Research and Anson worked together in preparing a specific report. This made the market observers to ask for increased securities frauds since the short-sellers and hedge funds were working in close collaboration to increase the impact of their sales in the market which would increase the probability for the U.S. securities and exchange commission charges.
Short selling is a method where an investor buys a stock, sells it with the intention of buying it back when the price of a stock is low due to unfavorable news on the company. This is a problem because hedge funds such as Anson, engaged in the process, can put on potentially profitable side-bets that the companies targeted by these reports will be affected. Such a coordinated attempt in the absence of balance disclosures can trigger severe legal consequences.
They also showed some of the emails between Anderson and Anson Funds, where the hedge fund was said to determine what should be written in the reports and the price targets. The documents also show that Anderson seemed to have only minimal input regarding the reports, and was rather operating under Anson’s direction. Some you may have never heard of, such as Market Frauds, which alleged that after examining as little as 5% of the documents available, there were more instances of securities fraud tied both to Anson Funds and Anderson. After the analyzing of the evidence, which Market Frauds had considered, they concluded that Anderson could be charged with SEC fraud at the earliest in 2025 when the function goes deeper in the investigation.
At first, Hindenburg Research argued that it does not interfere with its editorial decisions. The firm stated that it obtains leads from various sources including from the industries, informers, or the investors. Hindenburg always pointed out that each lead was carefully checked and that the company reserved editorial control for the reports that it released. Still, they leave reasonable doubts to the firm’s independence and whether it was happily collaborating with hedge funds with the aim to manipulate stock prices.
Hindenburg research released one of his more colorful reports in June 2020 in which he bet against Facedrive FSR/TSX, a Canadian ride-hailing eco-friendly company. In its report it accused the company of being over-valorized and over-compensating its promoters. Evidence from the court papers reveals that Anson was in touch with Anderson before the report was made public some of the emails even showed that Anson might have had an earlier glimpse of the report.
The disclosures are made at a time that the U.S Justice Department and the SEC are investigating hedge funds and short-sellers over possible manipulation. Anson Funds entered into similar settlements with the SEC in June in which it paid $2.25m without any liability being admitted. The settlement arose out of claims that Anson misled external publishers of negative research by not disclosing the payments.
The emergence of these events occurs at the same time with the declaration of the Hindenburg Research’s shut down. Citing that he would soon cease the operation of the firm due to most of the reports it aired, including the $100 billion report on Gautam Adani in 2023, which prompted political crises and market shifts. During the announcement, Anderson did not state the reason for closing the store but said that he wanted to spend more of his time with friends and family. Even though the firm closed its doors, Anderson reminisced about the company’s achievement, asserting that 98 individuals including billionaires and oligarchs suffered civil as well as criminal charges due to Hindenburg exposing some of the most powerful empires acrosss the globe.
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