LONDON (Reuters) – London-listed litigation funder Burford Capital <BURF.L> said it has found evidence of suspect trading patterns in its shares around the time short-seller Muddy Waters issued a report challenging the company’s accounts.
Burford said an investigation by the fund and an expert in market manipulation found trading activity in its shares on August 6 and August 7 was generally consistent with “material illegal activity”.
Burford’s shares fell 19% on August 6, the day short-seller Muddy Waters tweeted about a forthcoming short attack against an unidentified company, and dived a further 46% on August 7, when Muddy Waters released a report criticising Burford’s accounts and management.
The fund said it had made regulators and criminal prosecutors aware of its preliminary findings and was considering its options.
In its statement, Burford alleged it had identified evidence that its stock had been targeted by ‘spoofing’ and ‘layering’ manipulation.
Spoofing is where a stock price is artificially driven lower due to high volumes of trading orders being placed just below the current price but then cancelled before being executed. Layering involves placing and cancelling orders at higher prices in an attempt to give the impression of high trading volumes.
The fund said that several hours after Muddy Waters’ tweet on August 6, almost 90 million pounds worth of sell orders were placed and then cancelled without being filled – five times its average daily trading volume.
Muddy Waters was not immediately available for comment.
(Reporting by Iain Withers; Editing by Rachel Armstrong)