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SEC Confirms Probe of SoftBank

The investigation, confirmed in response to a FOIA request, appears to involve the Japanese firm’s trading activities.

SoftBank is the subject of an active investigation by the Securities and Exchange Commission, according to PlainSite, a legal transparency initiative.

The research provider on Wednesday shared the SEC’s response to a Freedom of Information Act request by Aaron Greenspan, the founder of PlainSite, a joint venture of Think Computer Corporation and Think Computer Foundation.

Greenspan said the SEC probe appears to be related to SoftBank’s trading unit, SB Northstar. He told Institutional Investor that news last year about SoftBank’s options trading triggered his initial FOIA request, which was dated December 2, 2020.  

In it, he requested “any investigative materials (from January 1, 2018 to the present) pertaining to the various SoftBank companies controlled by Masayoshi Son, specifically related to SoftBank’s trading of stocks and derivatives on those stocks.”

In the SEC’s response, dated March 24, the regulator confirmed that an investigation is “active and ongoing,” but refused to offer any documents related to the investigation, citing a FOIA exemption for records whose “disclosure could be reasonably expected to cause harm to the ongoing and active enforcement proceedings because, among other things, individuals and entities of interest in the underlying investigation could fabricate evidence, influence witness testimony and/or destroy or alter certain documents.”

Originally, on January 13, the SEC said it had no investigative records pertaining to SoftBank and therefore no FOIA exemptions concerning ongoing investigations would apply. At the time, PlainSite called the denial “shocking,” tweeting that “SoftBank’s multi-billion dollar market manipulation scheme was front page news worldwide.”

The latest response from the SEC confirming the existence of a probe came after Greenspan appealed the original FOIA decision.

“After rigging the Nasdaq, making front-page news and the SEC claiming it had never heard of it, the SEC now reveals that SoftBank is under federal investigation,” PlainSite tweeted Wednesday.

A spokesperson for SoftBank said the company is “not aware of any SEC investigation into the company’s securities trading and have not been notified by them to date.”

“SoftBank Group takes its obligations with respect to all regulatory matters very seriously,” the spokesperson said.

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Last year, the Financial Times reported that SB Northstar, SoftBank’s trading arm, had bought nearly $17 billion worth of shares in tech giants and another $3.4 billion in stock derivatives by the end of September. 

“SoftBank owns all the big names in the Nasdaq,” Greenspan said. “They were buying call options while simultaneously owning the underlying. If you do it in big enough quantities you can manipulate the stock price.”

Greenspan said he had shorted many of those names, and lost money doing so.  

SoftBank’s bullish positions on tech stocks fared well, as those names soared last summer. But the trading unit still lost $3.7 billion, mostly on shorts, the FT reported in November.

The aggressive trading raised concerns at Elliott Management, which is believed to be SoftBank’s second largest investor, according to the Wall Street Journal. It reported that the hedge fund had bought put options on an index of tech stocks to protect itself against SoftBank’s trading. 

SoftBank’s move into active trading was in contrast to its reliance on big private investments like WeWork, which pummeled SoftBank in 2019. More recently, SoftBank has been in the news for its $1.5 billion stake in Greensill Capital, the supply-chain financier that filed for bankruptcy earlier this month. 

Elliott did not return a request for comment by presstime.

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