Muddy Waters files suit alleging fake report, blackmail

Reuters News
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Posted: Jul 22, 2011 1:13 AM
Muddy Waters files suit alleging fake report, blackmail

By Himank Sharma

BANGALORE (Reuters) - Muddy Waters LLC has filed a lawsuit in a U.S. court, alleging a fake press release defamed it and saying an imposter claiming to work for the research firm had tried to blackmail a company for $2 million to withhold a damning report.

Hong Kong-based Muddy Waters and its director of research Carson Block have shot to prominence in recent weeks after issuing research reports alleging accounting irregularities against over half-a-dozen Chinese companies listed in North America, driving down their stock prices.

The company takes also short positions on the stocks, making money if share prices fall.

The lawsuit, naming Muddy Waters and Block as plaintiffs and filed with the Los Angeles Superior Court on July 20, alleges that an individual in Hong Kong impersonated himself as an employee of Muddy Waters and issued threats to an unnamed company.

The individual, whose identity is unknown, allegedly blackmailed the company seeking $2 million in exchange for holding back a research report.

Muddy Waters separately claimed that a June 21 press release issued on free news wire service 'BriefingWire.com' was defamatory in nature and was issued with malice.

The press release stated that the U.S. Securities and Exchange Commission had charged Muddy Waters and Block with fraud, and alleged Block was involved in market manipulation schemes.

A spokeswoman at the SEC told Reuters in June that the release was a fake, but would not comment on whether the agency is investigating further or has informed other authorities.

The lawsuit does not identify the defendants. The research firm said it will amend its complaint once it ascertains their identities. BriefingWire.com was not immediately available for comment.