The U.S. Department of Justice's heavy blow to short-selling transactions has expanded to more than 30 institutions

The U.S. Department of Justice's crackdown on aggressive short sellers has expanded to more than 30 companies.

According to people familiar with the matter, the U.S. Department of Justice is collecting contact information for dozens of short-selling hedge funds and research institutions to investigate possible trading abuses, according to the Financial Times. The Justice Department has issued subpoenas to a small group of market participants.

Bloomberg reported in December that the U.S. Department of Justice was plotting a massive crackdown on aggressive short sellers who violated various securities market rules. A few months later, the survey had expanded to more than 30 companies, some of which were not even aggressive hedge funds.

The Justice Department insisted the investigation was due to the growing number of complaints received from investors that called on the government to investigate the conspiracy of the short sellers.

The survey list includes some well-known companies that publish negative research, as well as funds that seek profitability when stock prices fall. These include Anson Funds, Muddy Waters Capital, Melvin Capital Management and Citron Research. The companies allegedly began facing an investigation by the U.S. Department of Justice in December.

其他公司还包括Atom Investors、Bonitas Research、Connectivity Capital Management、Falcon Research、GeoInvesting、Gotham City Research、GrizzlyRock Capital、J Capital Research、Oasis Management、Park West Asset Management、QKM、Sabrepoint Capital Management、Silverado Capital、Spruce Point Capital Management、Valiant Capital Management和White Diamond Research。

The list also includes prominent researchers such as Nate Anderson and his Hindenburg Research, as well as Fraser Perring and his Viceroy Research Company. And many of the companies on the above list are not even aggressive short selling funds.

At the same time, short sellers insist they have done nothing wrong and do not like their names being discredited by the financial media. They claimed not to have heard anything from the government, which made them angry that they were "kept in the dark."

Representatives of many companies, including Falcon, Grizzly Rock, J Capital, Oasis, Valiant and White Diamond, said investigators had not yet contacted them.

Kerrisdale's chief investment officer, Sahm Adrangi, wrote in an email:

Neither the U.S. Department of Justice, the U.S. Securities and Exchange Commission (SEC), nor any government authority has contacted us about any investigation.

We haven't spoken to any government figure in years.

Oasis' representative, Taylor Hall, also said: "It's hard for us to comment on things we don't understand. ”

And the U.S. authorities and government have indeed been asking for interviews with a large number of potential witnesses, which is why the names of these companies have leaked out.

Some retail investors are indeed very disliked by short selling, denouncing companies that publish negative research reports and investors who bet that stock prices will fall. Last year, in the frenzy of stocks such as GameStop, the U.S. Congress held relevant hearings on the issue.

Professional market participants believe that short selling ensures fair pricing of stocks.

While representatives of the companies insist they did not do anything illegal or improper, it is clear that the U.S. Department of Justice wants to make this an important investigation.

According to financial blogger ZeroHedge, the government has run into a question here: What will happen when the government investigates companies that have been touted in the commercial media as "white knights committed to eradicating fraud and corruption in public companies"?

The investigation began as early as December

For years, the U.S. Securities and Exchange Commission (SEC) and the Justice Department have been pursuing hedge funds for "distortion and short-selling" behavior, that is, publishing misleading and false information to depress the stock prices of the companies concerned and profit significantly from the process.

Last December, Bloomberg reported that the U.S. Department of Justice's fraud team and federal prosecutors in Los Angeles would jointly conduct a criminal investigation into short-selling by hedge funds and research institutions.

Authorities are delving into the symbiotic relationship between funds and researchers, looking for clues that hedge funds have profited from misconduct such as planning stock plunges and engaging in insider trading.

Numerous well-known short targets, including Luckin Coffee, Who to Learn from, Bank of California, Mallinckrodt, and many other well-known short targets have been closely watched by investigators, and dozens of companies will be on the first list of investigations.

According to Bloomberg, authorities are investigating the financial relationship between hedge funds and researchers. In the United States, foundations sometimes provide researchers with substantial consulting fees to obtain timely and in-depth insights into certain companies. For many researchers, these consulting fees are their main source of income.

Against this backdrop, some hedge fund companies have a crooked mind, offering researchers targets that they can then issue "tough" research reports in the market.

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