The CEO of trading firm Muddy Waters – and a target of a sweeping US inquiry into bearish investors – opens up about his chaotic, cutthroat industry and says he’s done nothing wrong.
Carson Block was on a Delta flight to New York when he felt blood pooling on his seat.
“The stock’s rocketing, I’m just physically ill, I want to vomit, and I’ve got a million things racing through my mind,” Block recalls. While prosecutors have gathered information on dozens of names in the industry, they’ve shown heightened interest in a few, including Block and his roughly $US200 million firm.
“Anytime somebody points a gun at you, there’s a non-zero chance something goes wrong even if that’s not their original intention,” he said. “That’s the case with being the subject of a DOJ investigation. There’s a gun pointed at us, and it’s really uncomfortable.” “Most of us were in some way outsiders for a long f---ing time,” Block says. “It’s really hard for us to hold our tongues and not make people feel uncomfortable.”
That hatred has been growing. Some of it comes from retail investors outraged over attacks on hot stocks. But there are also suggestions by academics and even some money managers that activist short selling may have devolved into a scheme of its own for making a quick buck. The short-selling model had to change after the financial crisis, he says, because it spurred years of loose monetary policy that distorted markets and put a number of bearish investors out of business.
Like others embroiled in the US investigation, he’s trying to determine what prosecutors are actually after.
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