Toronto-based hedge fund Anson Funds, under scrutiny for alleged collusion with American short-seller Hindenburg Research, is registered in India as a foreign portfolio investor(FPI).
The hedge fund runs two FPIs in India — Anson Funds Management LP, an entity based out of Texas, and Anson Investments Master Fund LP, a Cayman Islands-based entity, depository data showed. It has been alleged Nate Anderson, the founder of Hindenburg Research who recently announced the disbanding of the firm, had links with hedge funds, including Anson Capital, in preparing reports targeting companies.
According to a report published by Canadian media outlet The Markets Fraud Portal, Hindenburg allegedly colluded with Anson while preparing a report. The report was based on court filings in a defamation suit at the Ontario Superior Court.
Also read: Adani Group, US-based Nikola and more: Companies targeted by Hindenburg Research
Moneycontrol could not ascertain if Anson Funds had taken short positions in the Adani Group companies before Hindenburg published its report on Adani Group companies on January 25, 2023. The report led to a sell-off, wiping out billions of dollars off the conglomerate’s market capitalisation even as it denied the allegations. The stocks have since largely recovered.
The development assumes significance as any potential adverse outcome during the trial may also have an impact on its India FPI licence, legal experts said.
Market regulator the Securities and Exchange Board of India(Sebi) prescribes several standards that FPIs need to adhere to.
“FPIs are required to be ‘fit and proper’ under Sebi rules and any proof of major wrongdoing by the fund or its key functionaries could impact a fund’s fit and proper status,” a securities lawyer said on condition of anonymity. “However, in the current case, the verdict of the Canadian court is still awaited. Depending on final evidence emerging from the case, Sebi can always take a suo motu cognisance of the issue.”
At the centre of the case are allegations about Hindenburg’s editorial independence in publishing the reports.
"There are multiple counts of securities fraud for both Anson Funds and Nate Anderson, and we have only gone through 5 percent of what's in there as of the time of writing," court filing documents accessed by The Market Frauds portal showed. "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."
Anson’s chief investment officer (CIO) Moez Kassam has told the court that his firm shared research with a wide variety of sources, including Anderson. Hindenburg has maintained Anson Funds had no editorial control over the short-seller and reports published by it.
In June 2024, the US market regulator the Securities Exchange Commission(SEC) imposed a total fine of $2.5 million on two Anson group entities — Anson Advisors and Anson Funds for collaborating with “an activist short publisher”. Anson agreed to pay the top functionary of the short-seller a share of trading profits. The SEC did not name the short-seller.
However, the order said, in September 2018, Anson Advisors had asked the short-seller to issue a bearish report on Namaste Technologies, a company listed in Canada. Namaste Technologies, an e-commerce cannabis company, had to fire chief executive officer(CEO) Sean Dollinger in February 2019 following allegations made in a short-seller report.
Similarly, Anson asked the short-seller to publish a negative report on India Globalization Capital (IGC) Inc in October 2018. IGC, now called IGC Pharma, is an NYSE-listed firm developing treatments for Alzheimer's disease. Hindenburg had published reports against both the companies.
Last week, Hindenburg Research’s founder Anderson announced he was shutting down the firm, 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. No specific reason has been given for the closure.
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