Short seller says hedge fund lied to SEC about payment in trading probe

In his complaint, Left alleges Anson received a soft penalty from the SEC because the fund’s leaders bolstered the cases against him. Photo by Andrew Harnik/AP Photo/Postmedia files

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Andrew Left, the prominent short seller indicted by the United States over trading tied to social media posts, is suing a Toronto-based hedge fund, alleging its executives lied to federal investigators about payments made to him in order to “save their own skins.”

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The Los Angeles lawsuit is the latest turn in a years-long crackdown by the U.S. on bearish researchers, hedge funds and short sellers, which Left said in the heavily-redacted complaint started as early as 2018. The probe, which looked at trading in advance of online short seller reports, became public in 2021 after Bloomberg reported that Left and others were under investigation.

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The Justice Department also subpoenaed other financial firms seeking communications, calendars and other records relating to almost 30 investment and research firms, as well as three dozen individuals associated with them, people familiar with the investigation told Bloomberg.

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Among those that received subpoenas was Anson, which eventually resolved two SEC probes without admission of wrongdoing, including one involving payments to Left. In his complaint, Left alleges Anson received a soft penalty from the securities regulator because the fund’s leaders — Moez Kassam and Sunny Puri — bolstered the cases against him.

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“Defendants knew, or consciously disregarded a substantial risk, that their lie would result in civil and criminal charges against plaintiffs but told these lies anyway to save their own skins,” Left says in the complaint. “It worked.”

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An outside spokesman for Anson said Kassam and Puri testified truthfully under oath and that Anson intends to file a motion to dismiss, “laying out in detail the legal defects and absurdity of Mr. Left’s complaint.”

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“Mr. Left’s meritless complaint is nothing more than a desperate and extreme attempt to manipulate the legal system ahead of his criminal trial that starts in just a few months,” the spokesman said in an emailed statement. “Faced with 19 federal criminal counts and a dwindling list of options ahead of his day in court, Mr. Left is willing to say anything to try to escape accountability.”

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The SEC didn’t comment, citing the government shutdown. The Justice Department declined to comment.

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“We believe as alleged that there was a real miscarriage of justice here and we’re doing everything in our power to correct it,” Eric Rosen of Dynamis LLP, who represents Left, said in an interview.

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The lawsuit seeks to cast doubt on the government’s evidence.

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Left, who publishes stock tips through his Citron Research that are closely watched by thousands of investors, was charged by federal prosecutors with securities fraud in July 2024. The indictment, and a parallel civil case brought by the SEC, accuses Left of using false and misleading posts about his trading intentions in more than a dozen companies to try to nudge their stock up or down and make a quick profit. Companies named in the cases include American Airlines Group Inc. and Tesla Inc.