DOJ Launches Expansive Criminal Probe Into Short-Selling And Potential Insider Trading On Wall Street

  • The U.S. Department of Justice has launched a wide-ranging criminal investigation into short-selling by hedge funds and research firms, examining if those funds engaged in insider trading.
  • The move by the DOJ comes after the U.S. securities regulator said it’s looking at possible measures to require big investors to disclose more about short positions earlier this year.
  • Regulators also moved to protect small investors from trading apps that use features common to video games, presumably to boost riskier trading activities.

Svea Herbst-Bayliss from Reuters writes:

“Dec 10 (Reuters) – The U.S. Department of Justice (DoJ) has launched an expansive criminal investigation into short selling by hedge funds and research firms, Bloomberg News reported on Friday, citing people familiar with the matter.

The investigation, run by the DoJ’s fraud section with federal prosecutors in Los Angeles, is probing how hedge funds tap into research and set up their bets, looking for signs that they improperly coordinated trades or broke other laws to profit, the report said.

Authorities are scrutinizing the financial relationships between hedge funds and researchers, the report added, and examining if those funds engaged in insider trading or other abuses.

Anson Funds and Marcus Aurelius Value are among the more than a dozen firms under the scanner of the investigators, according to the report.

The department is also examining trading in dozens of stocks like Luckin Coffee Inc and GSX Techedu Inc (GOTU.N), on which Carson Block’s Muddy Waters Capital and Andrew Left’s Citron Research also circulated research, the report said…”

See full story here.

Categories: Business, Economy, Government

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