Hindenburg Research, led by Nate Anderson, could be facing increasing scrutiny as the US Securities & Exchange Commission (SEC) intensifies its crackdown on short-sellers, reported NDTV Profit.
The SEC announced legal action against Citron Capital and its founder, Andrew Left, for alleged improper gains, on Friday. The SEC’s statement accused Left and Citron of advising followers to buy or sell certain stocks based on their research, while simultaneously holding opposing positions. As followers acted on this advice, Citron would reverse its position, securing profits for themselves.
The SEC’s statement detailed, “We uncovered these alleged bait-and-switch tactics, which resulted in $20 million in ill-gotten profits for Left and his firm. We are committed to holding them accountable for these actions.”
The SEC’s complaint, filed in the United States District Court for the Central District of California, accuses Left and Citron Capital of breaching anti-fraud provisions of federal securities laws.
The SEC and other enforcement agencies have been investigating short-sellers since the volatile GameStop trades of 2021. Interest in this area intensified following a May 2023 report from Reuters, which suggested imminent actions against shortsellers.
The allegations against Left and Citron are reminiscent of claims by the Securities and Exchange Board of India (SEBI) regarding Hindenburg Research. In January 2023, Hindenburg’s report on Adani Group led to a significant sell-off in Indian markets, though Adani Group stocks have since rebounded.
SEBI’s show-cause notice alleges that Hindenburg collaborated with hedge fund manager Mark Kingdon and his entities to exploit advance knowledge of confidential information for building short positions. SEBI claims that Kingdon had a legal agreement with Hindenburg to receive a draft of the report before its official release on January 24, 2023.
SEBI has also been in communication with the SEC, with a subpoena issued to Hindenburg regarding suspicious trades in Adani Group stocks. Bloomberg Television’s Bailey Lipschultz noted that the industry is closely monitoring whether other high-profile figures involved in this investigation will face similar lawsuits.
In response to SEBI’s show-cause notice, Hindenburg Research stated that its revenue from the Adani short was relatively modest at $4.1 million. The firm claimed that, after accounting for legal and research expenses, it might break even on its Adani short.
