Carnes anonymously posted the report on AlfredLittle.com on Sept. 13, 2011, sending Silvercorp’s shares down 20 percent and wiping out more than C$275 million ($258 million) in shareholder value in one day, the commission said in a statement today. The report falsely stated a mining expert had concerns about Silvercorp because of differences in its Chinese and North American filings, according to the government.
Carnes, who runs hedge fund EOS Holdings LLC, allegedly reaped almost $2.8 million in gross profit from betting the Vancouver-based silver miner’s shares would fall, the commission said. Carnes said he “completely” disagrees with the commission’s allegations.
“My reports on Silvercorp proved to be true, as Silvercorp subsequently revised its resources and grades lower,” Carnes said in an e-mail. “The BCSC’s false allegations only serve to encourage Silvercorp’s bad behavior.”
Research firms, including Muddy Waters LLC, have published multiple reports in the past three years alleging that Chinese companies listed on North American exchanges were committing fraud. Since 2010, the U.S. Securities and Exchange Commission has deregistered 60 China-based issuers and brought 20 fraud actions against some 90 individuals and entities.
Silvercorp, which mines for its namesake precious metal in China, fell 0.4 percent to C$2.43 at 2:56 p.m. in Toronto. The shares have dropped 69 percent since the Carnes report was posted online.
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