The United States Department of Justice (DoJ) is now targeting Anson Funds in a criminal investigation centred on market manipulation, insider trading, spoofing, and fraud, as illegal short selling activities become a primary focus far beyond the SEC, with some anticipating charges in the coming months as unitholders panic and associates cooperate with authorities.
A Department of Justice investigation is the point of no return. In this case, SEC fines seem insignificant in comparison.
The DoJ’s investigation, which was recently revealed by Bloomberg, has compelled those who have done business with Anson to cooperate with the investigation.
Citron Research, led by Andrew Left, said in a December 13 statement that it has been fully cooperating with the government’s investigation.
In a December 10th expose, Bloomberg reported that the DoJ had “launched an expansive criminal investigation into short selling by hedge funds and research firms—thrilling legions of small investors and other sceptics of the tactics that firms use to bet on stock declines.
According to Bloomberg’s description of the DoJ investigation, these money managers “sought to engineer startling stock drops” and engaged in insider trading.
Bloomberg also states that, “Toronto-based Anson Funds and anonymous researcher Marcus Aurelius Value are among firms involved in the investigation,” along with Andrew Left’s Citron Research. Market manipulation, insider trading, spoofing, and fraud are all being investigated by Anson Funds.
According to Bloomberg, two rounds of subpoenas have already been issued, and a senior-level Anson Funds employee who spoke with us on the condition of anonymity confirmed this, noting that the most recent subpoena issued by the DOJ to Anson was received in November.
And now, reputable sources have confirmed that a number of short sellers, affected companies, and individuals have come forward and begun cooperating with the DoJ in the investigation.
This is devastating news for Anson Funds unitholders. What this ultimately means is that any money Anson may have made through illegal schemes is subject to confiscation. This could put all Anson Funds unitholders at risk for illegal trading profits.
Worse, those who continue to invest in the fund may face additional DoJ investigations. And, as previously stated, the DoJ does not simply confiscate profits; it also imposes punitive damages for fraud, which can be five times the profits. in market manipulation and fraud cases, as detailed in a 2019 memorandum on the financial consequences for investors. So, if Anson made $300 million in illegal profits over the last three years, they could face a $1.5 billion fine and the confiscation of the profits. That is a difficult situation for a fund with only $1.4 billion at its disposal.
According to sources, a number of large Anson Funds investors and unitholders are holding urgent meetings to examine all possible options for redeeming their funds without negatively impacting their returns.
The Department of Justice collected over $23 billion in fines in 2015.
Wells Fargo was fined $3 billion in 2020 for its fake account scandal, which pales in comparison to Anson Funds’ alleged market manipulation and fraud.
When the DOJ began investigating Allianz Global Investors, investors sued the fund for $6 billion. In August 2021, Allianz said it had reassessed the risks relating to the funds in light of the DoJ investigation and concluded the matter could have a “material impact on its future results”.
The pattern is clear: the SEC investigates a fund first, and then the DoJ steps in and things become much more serious.
Following only a “voluntary request for documents and information” from the Department of Justice, Allianz, Germany’s largest insurer, warned investors of a material hit to its earnings.
Immediately, the company said it saw a “relevant risk” that its Structured Alpha Funds “could materially impact future financial results of Allianz Group”. How much material damage has occurred? Allianz was unable to estimate the potential fines.
Anson Funds has yet to learn this lesson, but the final consequences will be severe if investors band together to sue the fund over material impact.
According to Bloomberg, the Department of Justice unit in charge of the investigation into Anson Funds has a formidable reputation on Wall Street. Recently, the DoJ unit has filed major cases against global banks and traders for illegal spoofing, including one that resulted in a $900 million fine for JPMorgan Chase & Co.
The DoJ arrived at this conclusion by examining trading data for suspicious patterns. And there are plenty of suspicious patterns in the companies Anson Funds has targeted.
Market Manipulation: The Unmistakable Evidence
A text stream from his documented relationship with Hindenburg Research demonstrates how Moez Kassam got Hindenburg started, with tiny Canadian Facedrive stock being one of the best examples.
Moez Kassam and Anson Funds provided the research, and Hindenburg published it, with Kassam inadvertently alerting his associates to what was about to be published:
Moez Kassam has consistently denied being short Facedrive, but these messages suggest otherwise. They also advocate for insider trading. The person with whom Moez Kassam is communicating via text is mocking Kassam because Facedrive was able to move up, resulting in a painfully short position. Kassam then suggests returning on Monday.
Indeed, the Facedrive share price began to fall sharply on that Monday as a result of a massive amount of paper created by Anson’s syndicate of short sellers. This all happened right before a brief report. When the respondent asks Kassam if he is “loaded up,” Kassam says yes, to the tune of 10,000 shares.
The respondent then inquires whether tomorrow is a good day, specifically regarding the short report publication date, to which Kassam responds in the affirmative. That is the definition of short seller insider trading.
Moez Kassam, CIO of Anson, admits to market manipulation and insider trading.
In a recent report, a soundbite from a phone call between Moez Kassam and an unknown individual provides additional damaging evidence, with Kassam stating:
“A lot of times if I’m working with Ben Axler [Spruce Point Capital] or doing this kind of stuff then we can create our own catalysts, right, because we’re putting out a report. So I know when things are going to fall and I’ll buy puts. It’s very easy to predict…a lot of people know when something is going to happen, so they’ll buy puts, and you know he buys 50 puts per day, so I’ll make 2000 trades today, which hurts the stock the next day when the report comes out.
Moez Kassam Presses the Panic Button
According to sources close to the hedge fund manager, Moez Kassam is now panicking and scrambling to assure investors that his fund is not a target, despite evidence to the contrary and money trails that show the fund has been paying outsized legal bills for the past six months in an attempt to head this all off—unsuccessfully.
Right now, it’s all about buying more time to move money offshore before the Department of Justice can complete its investigation.
In the meantime, major investors are expected to begin withdrawing funds from Anson in order to mitigate the damage.
Prior to the Bloomberg expose on the DoJ investigation, a recent $1 billion stock fraud scandal in which Moez Kassam and Anson Funds were also implicated had added to unitholders’ anxiety.
According to the registry, three Swiss holding companies associated with Knox and Sharp — Morris Capital Inc., Trius Holdings Ltd., and Varese Capital Inc. — received hundreds of thousands of shares. According to news reports, this includes transfers of 250,000 and 100,000 shares from Vancouver accountant Shirazali Jumani, respectively, and 100,000 shares from a Cayman Islands account belonging to Anson Investments Master Fund, which is controlled by hedge fund manager and short-seller Moez Kassam.
Unitholders have every reason to be concerned. The Department of Justice has a 97% success rate, and the recent prosecution of Murchinson, another hedge fund closely associated with Anson Funds and one of their partners in the shady shorting of cannabis company Zenabis, has investors on edge. Even more so because, in order to avoid a harsher punishment, Murchinson was forced to cooperate with authorities and expose Anson Funds’ activities.
But Murchinson isn’t the only one speaking under duress. Citron Research can now be added to the list of collaborators by investigators.
Meanwhile, according to sources close to the operations, Moez Kassam and his right-hand man, Sunny Puri, are frantically trying to delete evidence and persuade all associates to do the same. One of their first moves appears to have been to delete traces of their September 2020 responses to media allegations about their activities, which now contain an error message. The original message appears to have misrepresented the situation to shareholders, which would not have been well received by the DoJ.
These developments have recently resulted in the resignation of the head of Anson Funds’ US office, where no one wants to be associated with what is to come.
Unitholders have only a short time left to act before the damage is irreversible. They may be able to retrieve their funds if they call for redemptions now, before the DoJ charges Anson and seizes everything under US law.
In the midst of the panic at Anson Funds, Moez Kassam has hit the campaign trail, boasting that the Fund has grown by 43% year on year. That is an exceptional growth rate, but if the DOJ determines that it was obtained through illegal trading strategies and market manipulation, the entire fund will be liquidated. This would imply that all assets under management would be seized and liquidated.
However, there is a method to Moez Kassam’s madness: by recognising this level of return, the fund manager is signalling his intention to withdraw funds from the business and spend them in countries that do not have extradition treaties with the United States. In other words, he is getting ready to run with the money or to tune in with the money.
Bloomberg, Reuters, Aljazeera, and other major news outlets have already reported on this matter and will be closely following it, and we anticipate that more publications around the world will pick it up as the investigation progresses, further harming Anson Funds and its unitholders.
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