As part of a far-reaching investigation into alleged wrongdoing by short-sellers, the Federal Bureau Of Investigation reportedly raided the home of Citron Research founder Andrew Left in 2021.
Short-sellers bet that stock prices will drop in price. In short selling, a position is opened by borrowing shares of a stock or other asset that an investor believes will decrease in value. If the stock does drop after selling, the short seller repurchases it at a lower price and returns it to the lender. The difference between the sell and buy prices is the short seller’s profit.
The FBI seized computers from the home of Left, a famous short seller, sometime in the early part of 2021, Bloomberg reported on Feb. 4.
Dubbed “The Bounty Hunter of Wall Street,” Left is considered an activist short-seller. He told Bloomberg that he doesn’t know why the Feds targeted him.
“It’s very tough to defend yourself when you haven’t been accused of anything,” said Left, who publishes reports on firms that he claims are overvalued or are engaged in fraud. Left is widely known for advising investors on short selling. In January 2021, Left announced a short of video game retailer GameStop, precipitating a short squeeze that hurt him and other short sellers in the short term. After Left abandoned the stock, shares of GameStop skyrocketed.
Citron announced in January 2022 that it would publicly stop detailing companies’ shortcomings.
Investigators are looking into the relationships among the hedge funds and firms that publish negative reports on certain companies, often with the aim of sending the stock lower, according to sources.
“I’m cooperating, and I have full faith in the system and the First Amendment,” Left said.
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Left isn’t the only one under investigation. The Department of Justice also subpoenaed records tied to nearly 30 investment and research firms with links to three dozen well-known short-sellers, Bloomberg reported.
The list includes Melvin Capital Management founder Gabe Plotkin, Orso Partners’ Nate Koppikar, Jim Carruthers of Sophos Capital Management, Nate Anderson of Hindenburg Research, and Viceroy Research’s Fraser Perring.