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HONG KONG (AP) — U.S. short-seller Andrew Left engaged in market misconduct by publishing false or misleading information about a Chinese property developer, a Hong Kong tribunal ruled Friday.
The city's Market Misconduct Tribunal said in its decision that Left was reckless and negligent when his firm Citron Research released its report on Evergrande Real Estate Group in June 2012.
Citron is known for publishing online investigative reports about companies with the goal of profiting when their shares decline. Short sellers profit by borrowing shares of a company to sell, then buying them back after the price has fallen and pocketing the difference.
Citron's recent targets include Canadian pharmaceutical company Valeant, which it compared to collapsed energy giant Enron. It's also taken aim at chemical company Chemours, a DuPont spinoff it said was a bankruptcy waiting to happen.
The tribunal found that Left's allegations that the company, now known as China Evergrande Group, was insolvent and used fraudulent accounting were not true. In its ruling in favor of Hong Kong's market regulator, the Securities and Futures Commission, it said Left had little knowledge of local accounting standards and financial reporting. He also failed to check with experts or the company itself to verify information he received about the company from an unidentified source, it said.
The report sent Evergrande's shares tumbling 20 percent when it was released on June 21, 2012. Left, who had short-sold 4.1 million shares in the preceding days, earned 1.6 million Hong Kong dollars ($206,000).
Punishment for Left, which could include repaying his profits, will be decided later.
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