Abaxx calls for probe, hires Paul Weiss after short seller’s attack

Viceroy also questioned Abaxx’s technology, arguing that key parts of its business rely on software from outside vendors rather than proprietary infrastructure. Photo by Timon Schneider/SOPA Images/LightRocket via Getty Images

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The Toronto-based market infrastructure company said Sunday it has contacted the Canadian Investment Regulatory Organization, or CIRO, to request a review trading activity in its stock by Viceroy and other parties. Abaxx also said its Singapore business had proactively contacted the Monetary Authority of Singapore regarding allegations made by the short seller.

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The move follows a report by Viceroy, which disclosed a short position in Abaxx and argued that the company’s exchange appears busier than it really is. The research firm said much of the trading volume on the Abaxx Exchange is “sustained by management incentives,” rather than by commercial customers.

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Viceroy pointed to low open interest, trades that appear to offset one another and spikes in activity around investor events and company announcements.

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Viceroy also questioned Abaxx’s technology, arguing that key parts of its business rely on software from outside vendors rather than proprietary infrastructure. The firm criticized the Canadian company’s use of high-profile industry figures in investor communications, including former Goldman Sachs commodities chief Jeff Currie, saying their roles may be less significant than investors perceive.

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Shares of Abaxx have fallen 25 per cent since June 10, the day before Viceroy disclosed its short position, giving the company a market capitalization of $1.3 billion.

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Viceroy didn’t comment Sunday on Abaxx’s move to contact regulators.

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Abaxx rejected the allegations, calling them false, defamatory and part of a “short-and-distort” campaign designed to profit from a decline in its share price. The company said neither it nor any of its subsidiaries is under investigation by any regulator, and said “wash trading” is prohibited under the exchange’s rulebook and monitored through a market-surveillance program.

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The company also sought to reassure investors about its finances and operations, saying it has enough cash to fund roughly seven quarters of operations without needed to raise money. Abaxx said June trading activity has continued to increase, with average daily volume rising 12 per cent from May and open interest climbing more than threefold.

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