SEC Tightens Noose on Anson Funds As DoJ Closes in on Criminal Charges

The recent SEC charges against Anson Funds are significantly different than previous fines, and represent a clear tightening of the noose as the DoJ works to finalize criminal charges.

Important reading:

Part I: Moez Kassam and Anson Funds: A Tale of Corruption, Greed, and Failure
Part II: Moez Kassam & Anson Funds Part II: Rotten To The Core
Part III: Moez Kassam & Anson Funds: Panic as DOJ Widens Investigation
Part IV: Selling Everyone Out
Other reading: Anson Funds and the Great Con
Other reading: Moez Kassam & Anson Funds: The Big Secret
Other reading: GENIUS Brands – The Story Anson Funds Doesn’t Want You To Read

While many readers have reached out to express disappointment at the apparent leniency of the SEC up until now in the face of accounting fraud, wire fraud, market manipulation and insider trading in this case, the momentum has increased significantly.  The new SEC charges against Anson are far more meaningful than many may understand.

First of all, this is a penalty, not a settlement. In other words, it is an order from the SEC proving multiple accounts of wrongdoing. This is broad validation of criminal activities that will affect Anson’s ability to do business. Having an SEC finding against you for manipulation, for failing to disclose actions to stakeholders, and for illicit short-selling strategies will mean many investors will be forced to pull their money out, while other potential investors will steer clear of the Fund.

The latest charges also represent a major shift from a previous SEC ruling against Anson, in the form of the negotiated settlement the Fund came to with the SEC over the American Airlines front-running violation: https://www.sec.gov/files/litigation/admin/2023/34-98775.pdf

This time around, Anson again tried to settle with the SEC, which rejected the offer because this is part of a bigger, combined SEC and DOJ strategy.

Close observers of this long-running investigation will note that we have a 100% success record on Anson Funds. Namaste, as named in the new SEC charges, was mentioned by our investigators three times over the past three years here, here and here, and the SEC is now catching up. Tuesday’s charges represent simply the beginning of the SEC/DoJ barrage.

Our assessment is that Nate Anderson and Hindenburg Research are likely to be the next target, and we expect something from the SEC on this within the next 3-6 months.

The Hindenburg investigation is more time-consuming due to the sheer scale of the working relationship between Hindenburg and Anson. This thread of the investigation concerns much more than just a few million dollars, including far bigger damage to capital markets. Both Anson and Nate Anderson profited much more than Anson did with Andrew Left who is the unnamed researcher in the SEC’s ruling, who was an easier target that chose to cooperate with the SEC and DoJ.

Criminal Charges Are Coming

A civil penalty and slap on the wrist from the SEC is one thing. Criminal charges are quite another.

Our inside sources to date have been intelligence hits, and they now assure us that criminal charges are forthcoming. The SEC and DoJ are working together and the noose is tightening. With every SEC charge, violation and fine, the DoJ’s case is strengthened.

All the while, Anson Funds and their PR company Teneo continue to pump out PR pieces, happily published by their friends at the Globe & Mail, in an attempt to get out in front of the final blow.

Moez Kassam’s response to the SEC charges:

As expected, Moez Kassam was not contrite following the charges:

A Bloomberg article published on June 11 had Kassam defending his positions as benefitting investors:

“The bearish takes on both companies were ultimately borne out, said Moez Kassam, Anson’s founder and principal. Shares of the companies, which later changed their names, now trade below their prices at the time. ‘Anson’s involvement not only benefited our own investors but also the broader market,’ Moez Kassam said.”

This is market manipulation 101, which Kassam’s quote concedes. Of course, the bearish takes on both companies worked out. They killed all momentum in the stock, decimated the companies’ credibility, and stopped other investors from buying.

Even more insidiously, Anson used illegal trading practices such as naked short selling, wash trading and spoofing to drive the share price down. These hit pieces were the beginning of the end for both these companies as their capital structure was eventually broken and they never had the chance to recover. Again, there is a difference between making a bearish bet on a company and manipulating a company into oblivion.

Anson Funds Mocking the SEC

For some reason with all of this going on Moez Kassam has gotten it into his head that he is bulletproof like his hero Bobby Axelrod off Billions. Below is a copy of a Tweet from Anson Funds mouthpiece, OPM wire mocking the SEC and their judgement. One can only hope they don’t see the funny side and wipe the smirk off his face.
Here is a link to the Tweet and the image of the post below: https://x.com/OPMWire/status/1801066757274140790/photo/1

A few important points worth highlighting from the charges:

1. These proceedings arise from the Respondents’ work with activist short publishers who issue reports presenting bearish views of target securities (“short reports”). From at least 2018 through 2023 (the “Relevant Period”), the Private Placement Memorandum (“PPM”) for Anson Investments Master Fund (“AIMF”), the private flagship fund that Respondents advised, described a short position investment strategy to be used for AIMF but omitted that AIMF’s investment strategy involved working with activist short publishers and trading in the target securities, and paying a portion of AIMF’s trading profits to the short publishers in exchange for the short publishers sharing their work with Respondents in advance of posting it publicly. 

In other words, there are multiple other short publishers they worked with from 2018 to 2023. This indicates there is more to come, as we mentioned above. More bad actors and more companies. The ones we know that keep Moez up at night are Aphria, Tilray, Genius Brands and Facedrive and a host of others that he worked with Nate Anderson on. 

2. In addition, in September and October 2018, Anson Advisors agreed to pay “Individual A,” the principal of a short activist firm (hereafter, “Short Publisher A”), a share of AIMF trading profits in connection with Short Publisher A’s bearish reports and tweets on two securities. As a result of AIMF’s trading, Individual A’s share of AIMF’s trading profits exceeded $1.1 million, which Respondents paid through a third-party intermediary via invoices for purported research services that the third-party intermediary had not performed.

Anson Funds inaccurately recorded these payments as payments to the third-party intermediary for such research services and in doing so violated the Advisers Act books and records provisions.  

This could be viewed as wire fraud and a criminal offence. One of many things for the DoJ to sink its teeth into.  

18. As a result of AIMF’s trading in Namaste and IGC, Individual A was owed more than $1.1 million of AIMF’s trading profits. Individual A did not pay or contribute funds to Respondents to purchase securities in either Namaste or IGC. Individual A asked Anson Advisors to send him his share of trading profits through a third-party intermediary, to which Respondents agreed.

The third-party intermediary provided Anson Funds with invoices for purported research services that had not been performed by the third party intermediary and inaccurately stated that the amounts invoiced were for the benefit of the third-party intermediary, when they were for the benefit of Individual A. Anson Funds issued payment to the third-party intermediary, and Individual A collected payment from that third-party intermediary.

The million-dollar question now is: Who is this third party intermediary? And what other transactions did he/she do for Anson Funds? Does Anson Funds have invoices from other short researchers? This could prove the wolfpack theory that Bloomberg aired a few years back. 

21. Anson Funds inaccurately recorded the payments for the benefit of Individual A in its journal and ledgers as payments to the third-party intermediary for research services, when in fact they were to Individual A for trading profits. 

This is accounting fraud in its purest form.

Where are the Canadian regulators?

The question has to be asked that whilst all this is going on what exactly are the Canadian regulators doing? The answer appears to be “nothing”, and this is one of the reasons why no one will invest in Canada anymore. Trading volumes across all exchanges have been in freefall for years as everyone understands just how manipulated the markets are there.

Two more pieces are being put together over the next few weeks as a lot of people have written in with new information on Anson Funds. Stay tuned.