June 21, 2011 / 3:58 PM / 6 years ago

Release accusing Muddy Waters is a fake, SEC says

NEW YORK, June 21 (Reuters) - A press release alleging that regulators had charged short-selling research firm Muddy Waters with fraud is a hoax, the Securities and Exchange Commission said on Tuesday.

Earlier on Tuesday a press release was posted on Briefingwire.com, which allows the free publication of releases, saying Muddy Waters was being charged with fraud.

Muddy Waters, which has published research reports critical of several Chinese companies listed in the United States and Canada, later released a statement saying the release was a hoax.

A spokeswoman for the SEC said the release was a fake, but would not comment on whether the agency is investigating further or has informed other authorities.

BriefingWire later removed the release. Questions emailed to BriefingWire by Reuters were not been answered; the company does not list a phone number on its website.

BriefingWire’s site says people can add and remove press releases on their own, although Muddy Waters said in its statement that it specifically asked BriefingWire to take the release down.

U.S.-listed Chinese shares have come under fire as a rash of accounting scandals have been uncovered by short-selling research firms. Many of these stocks came to U.S. exchanges through reverse takeovers, in which a larger company obtains a stock listing without going through an initial public offering by combining with an already-listed shell company. Several of these stocks have since been delisted.

One of the largest targets of Muddy Waters is Sino-Forest TRE.TO, a Chinese forestry company listed in Canada. Shares of Sino-Forest have fallen 90 percent since being accused of accounting fraud by Muddy Waters. Hedge fund manager John Paulson, at one point the company’s largest shareholder, recently sold his stake at a big loss. [ID:nN1E75J0AK]

The short sellers have come under fire from investors and the companies themselves. (Reporting by David Gaffen; Editing by Leslie Adler)

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