Hindenburg founder colluded with hedge fund, say court docs: Portal
The preparation of bearish reports without the disclosure of participation can be charged as securities fraud by the US Securities and Exchange Commission
Nathan Anderson, the “activist” short-seller who announced recently that he would shut down his nearly eight-year-old Hindenburg Research firm, is under a cloud for his alleged links with hedge funds in preparing reports targeting companies, a Canadian portal has said citing documents filed before a court in Ontario.
In a cache of documents filed at the Ontario Superior Court of Justice in a complex defamation lawsuit, the head of Canada’s Anson hedge fund, Moez Kassam said his firm has shared research “with a wide variety of sources”, including Nate Anderson.
What court documents reveal
According to the Market Frauds portal, court documents revealed that Hindenburg colluded with Anson while preparing a report. The preparation of bearish reports without the disclosure of participation can be charged as securities fraud by the US Securities and Exchange Commission (SEC).
Also read: Hindenburg’s shutdown | Paranjoy Guha explains its implications on Adani Group
While short sellers borrow a security, sell it on the open market, and expect to repurchase it for less money after their damning report against the company brings stock down, the involvement of hedge funds raises eyebrows as they could also place parallel bets, putting more downward pressure on stock prices.
While news agency PTI could not reach Anson and Kassam, an email it sent to Anderson remained unanswered.
Anderson was “working for” hedge fund
“We know for a fact, from the email conversations between Anderson and Anson Funds, that he was indeed working for Anson and published whatever they told him to, from the price target to what should and shouldn’t be in the report. He asked them multiple times if they needed ‘more’. From what we can see in the dozens of exchanges, at no time did he have editorial control. He was being told what to publish,” the website claimed.
Market Frauds also shared screenshots of some email interactions — which it claims to have accessed through the documents available with the Ontario court — between Hindenburg and Anson to support its charge.
Also read: What Hindenburg’s shutdown means for Indian markets and politics
“There are multiple counts of securities fraud for both Anson Funds and Nate Anderson, and we have only gone through 5 per cent of what’s in there as of the time of writing,” it said. “From what we have read so far, it is almost a certainty that when the whole exchange between Hindenburg and Anson reaches the SEC, Nate Anderson will be charged with securities fraud in 2025.”
How it started
When the association first emerged, Hindenburg had said it received “hundreds of leads each year from diverse sources”, such as industry experts, whistleblowers and other investors. “We rigorously vet each lead and have always maintained full editorial independence over our work,” it claimed.
In 2020, Hindenburg Research published a report on Facedrive, a Canadian company that went public through a reverse merger as an eco-friendly ride-sharing service, chiding it for being overvalued and lavishly paying promoters. Anson allegedly exchanged emails with Anderson over the report and court documents reveal the hedge fund had knowledge of when the report was to be published.
The filings follow a separate years-long investigation by the US Justice Department and the SEC. In June, Anson Funds Management and Anson Advisors Inc, without admitting or denying any wrongdoing, agreed to pay USD 2.25 million to settle SEC claims that they failed to tell clients about payments to outside publishers of bearish research.
Also read: Hindenburg Research shuts down: Adani group stocks rally
Why the shutdown?
Last week, Anderson announced the shutting down of Hindenburg Research, which made headlines globally in 2023 after publishing explosive reports about billionaire Gautam Adani’s conglomerate, sparking political rows and major losses for the company.
He didn’t share a specific reason for his decision, but expressed a desire to spend more time with friends and family in the future.
“Nearly 100 individuals have been charged civilly or criminally by regulators at least in part through our work, including billionaires and oligarchs. We shook some empires that we felt needed shaking,” he wrote announcing the decision.
(With agency inputs)