Burford Alleges Share Manipulation Around Muddy Waters Attack

Burford Alleges Share Manipulation Around Muddy Waters Attack”

The company, now embroiled in a stand off with short seller Muddy Waters, said it had made regulatory authorities and criminal prosecutors aware of preliminary conclusions that showed evidence consistent with illegal market manipulation. We were very surprised by the share price fall, so felt we had to de-risk our position given how significant a proportion of our fund it was until we fully understand what was happening.

The City watchdog, the Financial Conduct Authority, said it was investigating the claims.

Both of these activities are illegal and have resulted in convictions previously, Burford Capital said.

Legal financier Burford Capital has alleged that its share price was illegally manipulated around the time of an attack by USA short-seller Muddy Waters.

Muddy Waters - founded by American Carson Block, who built up his reputation by alleging fraudulent activities at Chinese firms he targeted - said in response that the "only manipulation is that of Burford's return metrics, accounts and disclosures".

Burford pointed to evidence of "spoofing" and "layering". "That is wrong and that is illegal".

Burford chief investment officer Jonathan Molot told the BBC that its analysis of the market, at around the time that Muddy Waters made its criticism of the firm public, found that trades for more than half a million shares were cancelled. "They have nothing to do with us". We posted an innocuous tweet the day prior to publishing our report. Spoofing is the placement of a high volume of trading orders at a price equal to or better (i.e. lower) than the best-bid-best-offer price and the subsequent cancellation of these orders to move the price in a given direction without actually concluding any trades. "This is entirely normal and there is no market manipulation".

In 2015, the USA saw its first criminal conviction against former Panther Energy Trading boss Michael Coscia in a spoofing-related case and, in 2016, the FCA and DoJ coordinated their efforts in extraditing British trader Navinder Sarao - the "Hound of Hounslow" - to the U.S. where he admitted his part in triggering the 2010 Wall Street flash crash.

Burford's executives spent about two hours on Thursday addressing investors and analysts on a conference call, and responding to questions about the company's cash balance, use of fair value adjustments and the potential for a share buyback, among other things.

A spokesman for the U.K. Financial Conduct Authority said the regulator "is aware of these matters" and has been undertaking "wide-ranging enquiries", which will continue.

Gotham shorted London-listed Burford a year ago, though the firm doesn't have a short position in the company at the moment, according to the statement.

The following day, Burford hit back against the report, accusing Muddy Waters of peddling "factual inaccuracies" and "fallacious insinuations".

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