Justice Department Maybe Wondering Whether 45% Returns Might Not Be The Proof It Needs That Short-Selling Is Insider Trading [Dealbreaker]

And it’s not afraid to go to Canada to find it.

If you are not Canadian, chances are you haven’t heard of Anson Funds. In short, like Canada itself, it’s basically a smaller, colder version of American hedge funds and short sellers like Muddy Waters and Citron Research, with whom it has been known to work from time to time. Like those better-known muckrakers, it likes to bet against companies it thinks sucks. Like its more prominent peers, it has thusly earned the ire of those companies and those companies’ Reddit-based fanboys. Like them, it has also moved away from short-selling in the wake of the meme stock frenzy a year ago. And, also like them, it’s gotten a rather unpleasant knock on the door.

Of dozens of firms that Bloomberg has identified as being mentioned in prosecutors’ sweeping requests for information and communications, Anson is among a smaller number that have been subpoenaed directly, according to people familiar with the matter. Exactly what’s prompting that level of attention isn’t clear.

Not clear, no, but there are certainly plenty of things that might be drawing said level of attention.

In the past four years, Anson Funds has more than tripled assets under management beyond $1.5 billion. In each of the past two years, it’s posted returns of around 45% -- lifting its average annual gain since inception to almost 16%.... While Anson pitches itself as a relatively conservative long-short company, some attribute its winning performance to aggressive investment strategies that have proved legally contentious. The firm has been sued or countersued at least five times over a variety of allegations it engaged in deception -- claims that Anson has vigorously denied. Plaintiffs include corporations that it’s bet against, a company shareholder and a short-selling researcher who went from collaborating with Anson to attacking it…. On some occasions, people with knowledge of its operations said, Anson engaged in a controversial practice of betting that shares of cannabis companies would fall, and later participating in their secondary stock offerings -- sales that often trigger price drops…. Anson has privately worked with several researchers whose communications have been sought by U.S. investigators, according to people with knowledge of the dealings. They include Citron’s Andrew Left and Spruce Point’s Ben Axler….

Hedge Fund With 45% Returns Drawn Into DOJ Probe of Short Sales [Bloomberg]

For more of the latest in litigation, regulation, deals and financial services trends, sign upfor Finance Docket, a partnership between Breaking Media publications Above the Law and Dealbreaker.