Carson Block, CEO of Muddy Waters Capital LLC, at the company’s headquarters in Austin, Texas, in March 2022. Block described crypto as “an asset that barely has any value.”
Bloomberg | Bloomberg |
According to two sources familiar with the matter, U.S. authorities told Carson Block that they had closed their civil and criminal investigations into the short seller’s activities without taking any action.
Block, whose research on Muddy Waters became famous for exposing fraud at Chinese companies, received a search warrant and subpoenas in 2021 as part of a broad U.S. government investigation into possible coordinated market manipulation by activist short sellers and hedge funds.
The US Department of Justice and the US Securities and Exchange Commission (SEC) had already initiated corresponding investigations several years ago.
Justice Department prosecutors recently told Block’s lawyers that they would not take any further action, the two sources said on condition of anonymity.
Separately, the SEC sent Block a letter in recent days informing it that it, too, had completed its investigation, one of the sources said.
Spokespeople for the U.S. Department of Justice and the U.S. Securities and Exchange Commission (SEC) declined to comment.
Short sellers borrow shares in the hope of buying them back and returning them after the company’s share price falls, pocketing the difference. Activist short sellers typically publish their research and theories publicly.
The regulatory investigation into their activities led the SEC and the Justice Department late last month to charge Andrew Left, another prominent activist short seller, with market manipulation and fraud. Left has pleaded not guilty.
Institutional Investor first reported on the SEC’s dismissal of the case against Block on Wednesday.
