Icahn Under Federal Investigation After Hindenburg Report

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“Those regulations are more like guidelines than actual rules, Mr. Prosecutor,” is a bold defense.

On Wednesday, the investment company of billionaire financier Carl Ichan disclosed it’s being investigated by federal prosecutors after a short-seller report accused Icahn Enterprises of inflating the value of its assets. In other words, market manipulation. In other other words, illegal.

Hindenburg Strikes Again

Last week, short-seller Hindenburg Research released a report called “Icahn Enterprises: The Corporate Raider Throwing Stones From His Own Glass House.” Something tells us it wasn’t a puff piece. In it, Hindenburg accused IEP of inflating shares by more than 75% and likened the company to a Ponzi scheme. IEP’s stock price took a blow after the report was published and, yesterday, it took another hit when the company announced it was cooperating with a federal investigation.

This is Hidenburg’s one-two punch. They bet on a stock to depreciate and then they release a damning financial report on that company that will likely make its stock fall. The end result is that Hindenburg gets to walk away many dollars richer. You could even argue that itself is a form of market manipulation, but it’s all technically on the up-and-up since they’re exposing bad actors.

IEP said it was cooperating with the request and that prosecutors had “not made any claims or allegations against us or Mr. Icahn” and that “we believe that we maintain a strong compliance program.” But this is far from Icahn’s first regulatory rodeo:

  • Former President Donald Trump attempted to tap Icahn as a regulatory advisor, basically giving him a spare key to the kingdom. Right away the ethics of the decision were questioned. In 2018, federal prosecutors issued him a subpoena in regard to IEP trading shares of crane manufacturer Manitowoc right before the White House imposed tariffs on foreign-made steel. The timing seemed a little too fortunate.
  • In 2017, prosecutors alleged Ichan provided Las Vegas sports gambling kingpin William Walters with tips for trades in Clorox stock during 2011. Icahn was never charged with anything, but Williams was sentenced to five years in prison for a $43 million scheme linked to the insider trading of Dean Foods, one of the largest dairy processors.

This Means War: Icahn, as is his wont, made it clear he wasn’t going down without a fight. He, of course, didn’t have kind words for the short seller. In a statement, he said Hindenburg “would be more aptly named Blitzkrieg Research given its tactics of wantonly destroying property and harming innocent civilians.”