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Short-seller Carson Block launches hedge fund

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Short-seller Carson Block, founder of research firm Muddy Waters LLC who exposed accounting problems and wrongdoing at a slew of Chinese companies, has launched a hedge fund investment firm, a filing with the US Securities and Exchange Commission showed.

[NEW YORK] Short-seller Carson Block, founder of research firm Muddy Waters LLC who exposed accounting problems and wrongdoing at a slew of Chinese companies, has launched a hedge fund investment firm, a filing with the US Securities and Exchange Commission showed.

Block's new company, Muddy Waters Capital LLC, combines activism with long-short strategies but with an emphasis on betting against companies, the SEC filing said. Block, who according to the filing received an initial investment of US$100 million, had been contemplating a hedge fund for several years.

Block follows in the footsteps of short sellers such as Jim Chanos, whose Kynikos Associates manages about US$6 billion.

Block made his mark in the US$3 trillion hedge fund industry after he challenged accounting practices of a number of Chinese companies that trade on North American stock exchanges, then bet against them using his own money to short their stocks.

One of the companies to which Block drew attention was Sino-Forest Corp, a Canadian-listed Chinese company whose shares fell 74 per cent before it eventually filed for bankruptcy protection in March 2012.

Block's original Muddy Waters firm specialized in short-selling research that he distributed free of charge. Block is going to continue distributing free research, a source familiar with the situation said. Block's original firm had been making money by trading its principals' own capital, meaning Block had put his dollars behind his work.

Muddy Waters Capital hired Matijn Rasser, who spent over 10 year as an intelligence officer with the US government as the new firm's chief of staff. It also hired Jamie Brown, formerly of Standard Pacific Capital and PwC, as chief financial officer and chief operating officer, the filing said.

REUTERS