‘Shadowy’ Private Investigator Promised Catalyst Intel on Short Sellers — But Came Up Short, New Legal Documents Reveal

Illustration by Chloe Cushman

Illustration by Chloe Cushman

Catalyst Capital CEO Newton Glassman said PI Derrick Snowdy’s so-called evidence was “less valuable than what my dogs left for me on our lawn,” according to newly unsealed documents in a long-running legal battle.

A new “shadowy” figure has emerged in the long-running legal war between Canadian private equity giant Catalyst Capital, its rival West Face, and a slew of supporting characters that include a Canadian hedge fund, two Wall Street Journal reporters, and a whistleblower who has since become an activist short seller.

Catalyst dubbed the group the “wolfpack” — and in November of 2017 sued in the Ontario Superior Court of Justice in Toronto, alleging the individuals and companies had engaged in a conspiracy to torpedo its troubled publicly traded lending entity, Callidus Capital Corp.

The allegations were based on an article published in the Wall Street Journal on Aug. 9, 2017, outlining whistleblower accusations against Catalyst and Callidus, which said the article triggered a “chaotic sell-off” of Callidus shares by “naked” short-sellers. The defendants have denied the charges and countersued.

The latest bizarre details, which were included in documents in the case that were unsealed late last week, give another peek into the unsavory underside of corporate litigation, the cast of characters involved — and the extreme efforts to find the short sellers that companies believe are responsible for their woes.

Enter Derrick Snowdy

Canadian private investigator Derrick Snowdy claimed to have worked with well-known short sellers Carson Block, the Muddy Waters Capital CEO, and former hedge fund manager Marc Cohodes, according to court documents unsealed last week that include meeting notes, emails, and messages about Catalyst’s dealings with Snowdy. As a result, Snowdy said he would be able to provide Catalyst information proving there was a “cabal” of individuals and entities engaged in market manipulation of the stock of Callidus.


But Catalyst CEO Newton Glassman balked at hiring Snowdy, whom he suspected was a “double agent” whose so-called evidence was “less valuable than what my dogs left for me on our lawn,” according to more than three months of recently unsealed WhatsApp messages between Glassman and Danny Guy, a Bermuda-based investment manager who introduced Snowdy to Catalyst’s lawyers and its own private investigators.

Neither Block, Muddy Waters, nor Cohodes are parties to the lawsuits.

When reached by telephone, Snowdy — whom Vice dubbed “Canada’s most infamous private eye’’ — told Institutional Investor, “I’m not involved in the case,” and hung up.

The Anonymous Email That Started It All

Two days after the Wall Street Journal report in August of 2017, Guy emailed Glassman under the pseudonym “Vincent Hanna” — the Al Pacino character in the movie “Heat” — and alleged that West Face and others, including Cohodes, were involved in a “wolfpack” of individuals and entities engaged in market manipulation intended to harm Callidus, according to a recent West Face filing.

“This letter is to inform you that you have been targeted by a group of funds in Canada and abroad whose sole goal is to bring down your public vehicle Callidus and you personally. They are acting in concert to short your stock and to spread false rumors in the market place… The Wall Street Journal is a prime example of this coordinated effort. The ‘cabal’ does have private investigators following you and most likely have Russians (sic) hackers attacking your office emails and servers/cloud. The RCMP and FBI are aware of this ‘cabal’ from a criminal investigation but that doesn’t help you in the short term. I am sure you are not surprised but the funds are:

Greg Boland - WestFace Capital.

Roland Keiper - Clearwater Capital.

Sunny Puri/Moez Kassam - Anson Partners.

Shawn Kimmel - K2 Partners

Principals - MMCAP

Marc Cohodes - US Short Seller and his huge global network.”

The anonymous emailer eventually revealed himself to be Danny Guy who, according to the documents, had lost about $250 million in Concordia International, a Canadian company that had been a short target of Cohodes.

“After eventually revealing his true identity to Glassman, Guy claimed that his allegations would be corroborated by a shadowy private investigator with a long history of questionable behaviour and misconduct named Derrick Snowdy,” according to the recent filing by West Face.

(Other court documents state that Snowdy filed for bankruptcy in 2009 on $13 million in liabilities and that in 2014 he received a restraining order forbidding him from disclosing discovery involving CN Railway. He received another court order in 2017 for allegedly forging and disseminating documents about J.D. Irving. All of these statements were made during a cross-examination of Catalyst managing director Jim Riley by West Face attorney Matthew Milne-Smith.)

In a meeting with Catalyst lawyers and private investigators, Snowdy attempted to prove his bonafides by claiming to have helped Block on his famous 2011 short of Sino-Forest, according to recently unsealed notes of that meeting taken by Catalyst attorney Naomi Lutes.

Block, however, told II that was not true and said that his first contact with Snowdy was via an unsolicited email from the private investigator in 2014, a copy of which Block provided to II. Block also said he did meet with Snowdy in San Francisco twice, once in 2015 and again in 2016, producing emails indicating the meetings. He also said he hired the man to do some minor work in Canada, “likely paying him less than $10,000.”

Cohodes met Snowdy in late 2016 after being introduced to him by reporter Roddy Boyd. The short seller eventually invited the private eye to his home in California, according to the meeting notes and confirmed to II by Cohodes. Lutes’ notes also revealed that at least at one point during their associations, Snowdy recorded his conversation with Cohodes. Cohodes told II that those recordings were done without his consent. Taping a conversation without all parties’ consent is illegal in the state of California.

It now appears that Cohodes was a target. “I’ve never paid Derrick Snowdy a dime. He never did work on my behalf. Derrick Snowdy falsely represented himself and is a fraud,” Cohodes told II. “I have engaged my lawyers to look into taking legal action against those who paid him significant sums of money.”

In addition to the claims about the two short sellers, Snowdy also told the Catalyst representatives that “he was at a [meeting] where a partner from a downtown law firm allegedly said that for 5mm [dollars], the lawyer can get the right judge to oversee the case and provide the right decision,” according to the meeting notes.

(Before hanging up on II, Snowdy said the letter, as he called it, “does not reflect my recollection of the meeting.”)

“Selling Info to the Highest Bidder”

Over the course of several months of WhatsApp conversations, the documents show that Glassman became increasingly agitated with both Guy and Snowdy, who had promised he had “some specific trading data and information” but failed to produce any.

At one point, the documents show, Glassman told Guy he was either “being intellectually dishonest or manipulated by your guy,” later adding, “My guys know that he has a history of just selling info to the highest bidder. That makes him a huge risk of being, for example, playing both sides (or being pd by one or more of the Wolfpack while acting for u).”

Guy also told Glassman that he had already paid Snowdy “way more than” $25,000, according to the unsealed documents.

“He is likely dirty,” replied Glassman, a non-practicing lawyer who at one point also schooled Guy on the law regarding market manipulation and Veritas Investment Research, a Canadian firm that had written bearish research on Callidus and was subject of another Catalyst lawsuit. “No Danny. U do not understand the law,” wrote Glassman , according to the WhatsApp messages. “Veritas can write whatever they want. Only if veritas writes something untrue AND it is shown to be coordinated w the Wolfpack THEN its mkt manipulation. Writing a report with a common thesis or even facts provided by the Wolfpack is NOT illegal.”

While Catalyst representatives were ultimately dismissive of both Guy and Snowdy, the private eye apparently wasn’t entirely useless. According to other court documents, Catalyst managing director Jim Riley testified under cross-examination that Catalyst had not informed its investors about its criticisms of Snowdy because “subsequently he does give us some information that was meaningful.”

Riley did not elaborate. But Snowdy did offer the name of Canadian hedge fund Anson Group. Along with West Face, those two firms were the only names mentioned in the original anonymous email that ended up being sued by Catalyst.

Other alleged “wolfpack conspirators” included whistleblower Nate Anderson and his firm Clarityspring, which provided information on its investigation into Catalyst and Callidus to Wall Street Journal reporter Rob Copeland, one of two WSJ reporters who are also among the defendants.

Anderson now runs activist short research firm Hindenburg Research.

And while Catalyst did not hire Snowdy, the Canadian private equity firm did hire a firm that engaged Black Cube, an Israeli investigative firm often called a “private Mossad” because of its ties to the Israeli intelligence agency. (Catalyst has since sued Black Cube, alleging it conducted a reckless and negligent investigation. The details were previously reported in the Wall Street Journal.)

The so-called wolfpack lawsuit was the fourth one that either Catalyst or Callidus, or both of them, have brought against West Face since June 2014. Two have been dismissed, and a third has been in limbo for years.

Catalyst declined to comment.