Herbalife Trades Under Investigation

May 5 2014 | 11:28am ET

Nutritional supplements company Herbalife, accused by Pershing Square Capital Management of being a pyramid scheme, faces a raft of state and federal investigations. But it isn’t alone.

The Federal Bureau of Investigation and Securities and Exchange Commission are looking at investors in Herbalife—both on the long and short side—to see if any improper trading occurred amidst the high-profile dispute between the company and Pershing Square, one that has also drawn in other prominent hedge fund managers, such as Carl Icahn, George Soros and Third Point’s Daniel Loeb.

According to The New York Times, the FBI and SEC are looking into investors with contrasting opinions on Herbalife. The SEC is seeking information from Icahn and Soros, among others, while both the regulator and the FBI are investigating whether Pershing Square improperly pushed other investors to short Herbalife prior to its announcement of its own $1 billion short bet in December 2012. Indeed, the SEC sought information from Pershing Square in a probe of a person outside of the hedge fund who shorted Herbalife after learning of its plans. The person is a roommate of a junior employee, who allegedly mentioned the Herbalife bet. The roommate earned at least $20,000 trading on the information.

Pershing Square has denied leaking “to anyone any information about its Herbalife position or its Dec. 20, 2012, presentation prior to its public release. In fact, the firm went to great lengths to avoid any premature disclosure.”

The FBI and SEC are looking for evidence of insider trading, disclosure violations or market manipulation. No such evidence has yet emerged, according to the Times.

Pershing Square founder William Ackman’s public campaign against Herbalife reinvigorated a nearly decade-long feud with Icahn, who made a huge long investment in the company. The two men spent the better part of a year bickering through the media before burying the hatchet last month.


In Depth

Star Fund Managers Battered By Rocky Ride In Yields, Currencies

May 28 2015 | 6:05am ET

Some of the biggest names in the investment world have been whipsawed by the recent...

Lifestyle

Yale Receives $150 Million Gift from Blackstone’s Schwarzman

May 12 2015 | 12:10am ET

Yale University announced it has received a $150 million gift from Blackstone Group...

Guest Contributor

The Road To Tax Alpha

May 28 2015 | 5:36am ET

Tax-related alerts are increasingly helping investment managers harvest tax alpha...

 

Sponsored Content

Editor's Note