Anson Funds Settles With SEC in Long-Running Short Seller Probe

The hedge fund worked with activist short seller Andrew Left, though he was not named in the case.


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More than three years after the government began its exhaustive probe of short sellers, the Securities and Exchange Commission has finally managed to charge someone: Anson Funds, a $2.5 billion hedge fund, which reached a $2.25 million settlement with the SEC over the fund’s alleged failure to tell its investors about its balance sheet arrangement with an activist short seller.

The short seller, while not named, is Citron Research’s Andrew Left, who has been the subject of a federal investigation for years but so far has not been charged with anything. In early 2021 Left discovered he was under investigation when the FBI seized computers from his home. (Left, who declined to comment, wrote the reports about the two companies that are named in the settlement.)

Institutional Investor was the first to report the existence of balance sheet arrangements like that between Anson Funds and Left. While such arrangements have become controversial, the SEC did not allege that there was anything improper about them.


“The implication of this action is that the SEC sees no problem with ‘balance sheet arrangements’ under which funds pay activist short sellers for advance copies of reports,” said one short seller.

The minor nature of the infraction and the small size of the settlement was far from the grand hype that surrounded the investigation, which was said to involve dozens of short sellers, and numerous companies, including some blue-chip names. One fund manager called the SEC settlement with Anson “a consolation prize for some ticky tack bullshit.”

In a statement, Anson said “The SEC brought settled charges that focused on what it viewed as insufficient disclosure in our fund documents regarding Anson’s use of research consultants, the way that certain payments to a consultant relating to two short investments were recorded in Anson’s books and records in late 2018, and a compliance rule violation that is derivative of the other two charges.”

According to the SEC, Anson worked with the activist short seller to issue bearish reports on companies whose shares Anson had shorted, then Anson shared some $1.1 million in trading profits with the short activist when the stocks fell following the reports’ release. The SEC said that Anson placed its short bets before the report was published, then covered its short soon thereafter.

The SEC named two companies — cannabis companies Namaste Technologies and India Globalization Capital — both of which Citron wrote about in September and October of 2018. Namaste settled a shareholder lawsuit and renamed itself, and India Globalization Capital was eventually delisted. Citron’s report called it the “poster child of the cannabis bubble.”

The SEC did not allege that the short reports were false or defamatory or that either Anson or the short seller had manipulated the stocks by shorting them.

“Both of the companies in question were ultimately found to be engaging in deceptive business practices, and Anson’s involvement not only benefitted our own investors but also the broader market by exposing these bad actors.” Anson said in its statement.

“The short seller is an activist short publisher that presents itself to the market as an independent research firm…. that purports to expose frauds or other problematic conduct at target companies through its own website and twitter feed,” the SEC said.

Anson made its payments to the activist through a third-party intermediary, according to the SEC. It said that Anson violated the SEC’s recordkeeping provisions by inaccurately recording these payments as payments to the third-party intermediary when they were actually for the short seller.

The SEC said it has closed its investigation into Anson. But the broader federal investigation of short sellers is believed to be ongoing.