Hindenburg Research, led by Nate Anderson, is facing allegations of securities fraud along with Canada’s Anson Funds, according to a report by the Market Frauds portal. The portal claims to have obtained court documents from Ontario, where Anson is involved in a defamation lawsuit. These documents allegedly show that Hindenburg collaborated with Anson while preparing bearish reports on certain companies.
The Market Frauds report suggests that the preparation of such reports, without disclosing the involvement of both parties, could lead to charges under the US Securities and Exchange Commission (SEC) regulations, specifically Sections 17(a) and 17(b) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934.
This controversy began after Bloomberg’s December 12th report revealed that Moez Kassam, the head of Anson Funds, admitted in a deposition that he shared his research with multiple parties, including Hindenburg’s Nate Anderson. However, Hindenburg denied any collusion, stating that it receives hundreds of leads each year from various sources but maintains editorial independence in its reports.
Despite these claims, Market Frauds has published evidence from court filings, including email exchanges between Anderson and Anson Funds, which suggest otherwise. The emails indicate that Anderson was following Anson’s instructions regarding report content, including price targets and what should or should not be included. Anderson allegedly asked Anson multiple times if they needed “more,” implying a lack of editorial control over the reports.
The Market Frauds portal further suggests that both Anson Funds and Nate Anderson could face regulatory action for orchestrating a short-selling campaign while purchasing stocks to cover their shorts. They also claim that Anderson might face securities fraud charges as early as 2025. The portal’s report is based on just 5% of the content from the court documents, and the full details, once released to the SEC, are expected to lead to charges.
Canada’s Anson hedge fund operates two FPIs in India — Anson Funds Management LP, based in Texas, and Anson Investments Master Fund LP, based in the Cayman Islands, according to depository data. It has been claimed that Nate Anderson, the founder of Hindenburg Research, who recently said he was closing the firm, had connections with hedge funds like Anson Capital when creating reports about companies.
Short-selling involves borrowing securities, selling them in the open market, and later repurchasing them at a lower price, which can be influenced by negative reports. The involvement of hedge funds like Anson raises concerns, as they may be making parallel bets that further drive down stock prices.
This legal situation follows a broader investigation by the US Department of Justice and the SEC. In June, Anson Funds settled SEC allegations for failing to disclose payments to external publishers of negative research, paying a $2.25 million settlement without admitting or denying wrongdoing.
In June 2024, the U.S. market regulator, the Securities and Exchange Commission (SEC), fined two Anson group companies, Anson Advisors and Anson Funds, a total of $2.5 million for working with “an activist short seller.” Anson agreed to give the short-seller a share of the trading profits. While the SEC did not name the short-seller, the order stated that in September 2018, Anson Advisors asked the short-seller to publish a negative report on Namaste Technologies, a Canadian e-commerce cannabis company. As a result of the short-seller’s report, Namaste fired its CEO, Sean Dollinger, in February 2019 after facing allegations.
In October 2018, Anson also asked the short-seller to publish a negative report on India Globalization Capital (IGC) Inc. IGC, now known as IGC Pharma, is a company listed on the NYSE that is working on treatments for Alzheimer’s disease.
Hindenburg Research previously made headlines in 2020 for its report on Facedrive, a Canadian ride-sharing service. The report criticized the company’s overvaluation and payments to promoters, and it was revealed that Anson was in communication with Anderson before the report’s release.
Anderson recently announced the closure of Hindenburg Research, citing a desire to focus more on personal relationships. He made a point to mention that Hindenburg had played a role in bringing charges against numerous individuals, including billionaires and oligarchs, through its work. However, with the ongoing investigation, his company and its practices are now under intense scrutiny.
