FOIA Requests Offer Signals, and a Requester Provides Names
Activist short seller Andrew Left always had a taste for risk. So, with his freedom and fortune on the line a few weeks ago in a Los Angeles courtroom, Left tried to beat the federal securities fraud charges he faced by taking the witness stand in his own defense. He bet everything on his ability to persuade a jury that he wasn’t the criminal fraudster that prosecutors painted him to be.
“Everything I wrote was what I believed to be true.”
For more than two decades, the founder of Citron Research was one of the most recognizable – and controversial – figures in American finance. Left, 55 years old, built a career identifying companies he believed were overvalued, overhyped, or worse. As he tangled with executives, he became one of Wall Street’s best-known activist short sellers.
Now he was trying to persuade a federal jury that he had done nothing criminal.
Left’s testimony spanned the last two days of his trial, May 26 and 27. When the prosecution was finished cross examining him, Left placed an order for the transcript – with a court reporter named Michael Corleone.
Yes, Michael Corleone.
Not a good omen.
Left’s decision to testify was unusual. Securities-fraud defendants frequently choose not to take the stand, leaving prosecutors to prove their case through documents, trading records, communications, and cooperating witnesses.
But Left chose a different path. Jurors heard directly from the man whose research reports, social-media posts, and television appearances had influenced investors for years.
Taking the stand, Left described himself and his short-selling enterprise, Citron, as “the opposite of a pump-and-dump.” He testified that he put his “heart and soul into every report” and insisted that his publications reflected genuine convictions about the companies he covered. He described his work as a blend of facts and opinions – and maintained that he never intended to deceive investors.
But prosecutors tore into him, and the jury didn’t buy his story. Their June 1 verdict – guilty on one count of participating in a securities fraud scheme and 12 more counts of securities fraud – leaves him facing a maximum penalty of 25 years in prison.
Sentencing is set for August 31.
The guilty verdict in this closely watched federal prosecution could reshape the activist short-selling industry. Prosecutors argued that Left publicly told investors one thing while privately trading another. Left countered that he was engaged in lawful market commentary and ordinary trading activity.
“I’m a trader,” Left said repeatedly on the stand.
“A short seller cannot kill a company. You can expose a company,” he testified.
This was the first time that federal prosecutors successfully persuaded a jury that the conduct of a prominent activist short seller crossed the line from aggressive market advocacy into criminal fraud.
The resulting verdict may ultimately be an unfavorable precedent for the dozens of other short sellers reportedly subpoenaed as part of a broader stock-fraud investigation that the Justice Department began under the Biden Administration and has continued under Donald Trump.
In a press release immediately after Left’s conviction, one of the FBI’s top agents in Los Angeles rattled the saber: “While this conviction cannot make up for the significant and emotional harm he inflicted upon his unwitting investors, it does send a message to those who may be looking to profit from similar schemes – think twice because the FBI has a proven track record of rooting out fraudsters who illegally tilt the playing field against honest investors and undermine confidence in our markets.”
The obvious question now is whether Left’s case was unique – or whether it represents the beginning of something larger. And, if the latter: who, if anyone, will be targeted next?
One place to look for clues is FOIAengine, which tracks Freedom of Information Act requests in as close to real-time as their availability allows. One noteworthy requester, in particular, appears to have name-checked every possible target in his requests. We’ll come back to that. First, more background.
Activist short sellers have cult followings on social media, and they often revel in their notoriety. We’ve covered many of them in these pages, including Hindenburg Research’s Nathan Anderson, Muddy Waters’ Carson Block, Orso Partners’ Nathan Koppikar, Culper Research’s Christian Lamarco, and Safkhet Capital’s Fahmi Quadir, aka “the Assassin.” Those we’ve written about have something more in common than just the catchy names that bring to mind looming disaster (“orso” means bear; the Hindenburg crashed and burned; “citron” means lemon; and an assassin – well, you get the idea). They also have a FOIA footprint, either from probing a target, or being one.
The kind of short sellers we’re talking about are those who target a publicly traded company whose stock they believe to be overvalued, and then widely circulate their findings across online platforms and social media in the hope that others will join the selling and drive the stock price down even more.
In and of itself, short selling is a legal trading strategy that, proponents say, leads to corporate accountability and more efficient markets. The short seller identifies a vulnerable target, borrows shares (or buys “put” options) in that company, and then sells the shares at the current market price. Later on, the short seller “covers the short” by buying back the stock at a hoped-for lower price, pocketing the difference. The goal is to profit from the future decline in the stock price.
What’s different about the activists is their use of hype and publicity to beat down a stock. For a short seller to win big at this high-stakes game, investors on the other side of the transaction necessarily must lose. And although there’s an inherent risk of loss in any investment, what the feds saw in Left’s case was something else: a rigged market, manipulated by Left to scam millions from those who believed what he told them.
The way it worked, according to the feds, was simple: Left lied about his company, and his intent. Prosecutors alleged that when Left appeared on cable news channels such as CNBC, Fox Business, and Bloomberg Television to tout one of his research reports (Citron’s website says there were more than 150 of them), Left already had lined up trades to quickly profit from the price swings his commentary created – “at prices vastly different from the target prices that Left recommended to the public.”
The feds called this making “false representations to the public to bolster his credibility, [while] behind the scenes, Left allegedly took contrary trading positions to reap quick profits off the stocks he either promoted or pilloried through Citron,” generating roughly $20 million in profits.
For years, we’ve tracked the unusual overlap between activist investors, whistleblowers, private investigators, regulators, journalists, and professional FOIA requesters. FOIAengine is about signals, and FOIA records provide a window into the companies, products, industries, and regulatory actions attracting unusual attention from some of the most sophisticated information-gatherers in finance.
In the wake of the Left conviction, that FOIA ecosystem has become significantly more interesting.
Our previous reporting about short sellers has examined not just the criminal charges against Left, but the SEC whistleblower award received by Muddy Waters founder Carson Block, the role of private investigators operating in the activist-investor world, and the growing intersection between short sellers, regulators, litigants, and information specialists.
Viewed together, those stories reveal the larger, more interconnected world of activist short sellers – a sprawling information-gathering network that relies heavily on public records visible through FOIAengine.
One of the more interesting players in that ecosphere is a requester named Joe O’Donnell, who runs a company called Canary Data. The Wall Street Journal profiled O’Donnell and his company a few weeks ago.
As the Journal described it, O’Donnell, 42 years old, created “a new Canary AI agent, named Stanley after the investor Stan Druckenmiller, [to] scan the market and its data sources for cyclical stocks that appear to be priced too high or too low, evaluating and writing up ideas in chart-filled memos.”
According to the Journal, Canary recently raised a new round of venture capital from Tiger Global, where O’Donnell previously worked as a partner, and Arena Holdings. Both companies are listed on Canary’s website. Customers are said to include Tiger and Flight Deck Capital, paying annual prices ranging from the mid-five to the mid-six figures, according to O’Donnell.
The Journal story went all in on the AI hype, but what we’ve been seeing behind the scenes in FOIAengine is the low-tech side of O’Donnell’s operation. Over the past few years, he’s pumped out thousands of once-a-month FOIA requests, mainly to the Securities and Exchange Commission, Food and Drug Administration, and Federal Trade Commission. His requests follow a familiar script – always focused on activist short sellers.
For example, in a request last month to the FTC, O’Donnell listed the email domains for seemingly every activist short seller. He sought “any email correspondence between your agency and anyone . . . with the domain name @blueorcacapital.com, @viceroyresearch.com, @muddywaterscapital.com, @scorpioncapital.com, @alderlaneeggs.com, @thebearcave.com, @cablecarcapital.com, @brontecapital.com, @grizzlyreports.com, @bleeckerstreetresearch.com, @culperresearch.com, @kerrisdalecapital.com, @safketcapital.com, @sprucepointcap.com, @iceberg-research.com, @shadowfall.com, @hntrbrk.com, @ningiresearch.com, @jehoshaphatresearch.com, @fuzzypandaresearch.com, @gothamcityresearch.com, @wolfpackresearch.com, @manateeresearch.com, @morpheus-research.com, [and] @hithawk.com.”
For anyone tracking activist short sellers and wondering who might be next in the government’s sights, O’Donnell’s list of domains offers a good starting point.
The existence of FOIA requests does not mean an investigation exists. A subpoena does not mean charges will follow. Regulatory scrutiny does not imply wrongdoing.
For years, many activist short sellers viewed litigation from target companies as the primary occupational hazard. Their greatest risk often came from an angry CEO or a defamation lawsuit – the cost of being in the game.
Today, a different concern may be emerging.
The Justice Department now possesses a successful trial blueprint. The government has demonstrated that it can persuade a jury to view certain forms of activist trading and public commentary through the lens of securities fraud.
That may be the most significant consequence of the Andrew Left verdict.
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Next: The latest FOIA requests to the Food and Drug Administration.
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John A. Jenkins, co-creator of FOIAengine, is a Washington journalist and publisher whose work has appeared in The New York Times Magazine, GQ, and elsewhere. He is a four-time recipient of the American Bar Association’s Gavel Award Certificate of Merit for his legal reporting and analysis. He is the author of The Partisan: The Life of William Rehnquist. His latest book, Summer of ’71: Five Months That Changed America, about the fateful year before Watergate, will be out on June 30. Click here to watch the official book trailer. Jenkins founded Law Street Media in 2013. Prior to that, he was President of CQ Press, the textbook and reference publishing enterprise of Congressional Quarterly. FOIAengine is a product of PoliScio Analytics (PoliScio.com), a new venture specializing in U.S. political and governmental research, co-founded by Jenkins and Washington lawyer Randy Miller. Learn more about FOIAengine here. To review FOIA requests mentioned in this article, subscribe to FOIAengine.
Write to John A. Jenkins at JAJ@PoliScio.com.
