Britain's FCA looking into Muddy Waters short attack on Burford Capital

Burford backer Neil Woodford and Carson Block of Muddy Waters

Burford backer Neil Woodford and Carson Block of Muddy Waters

The next day, Muddy Waters published a report which delivered a diatribe against Burford, describing the litigation funder as a 'poor business masquerading as a great one.' Burford responded by calling the report 'disgusting'.

"It strains credulity to believe that a decline on the order of hundreds of millions of pounds in market capitalization was driven exclusively by actual trading amounting to a few hundred thousand pounds absent market manipulation", Burford said.

Christopher Bogart, chief executive of Burford, said the company's "market-leading" business is the same as it was a week ago.

In its statement Monday, Burford said that in the hours after Muddy Waters' initial tweet, nearly 90 million pounds ($109 million) of sell orders in its shares were placed and canceled without being filled, for a stock whose average daily volume is less than a fifth of that amount. Layering involves placing and cancelling orders at higher prices in an attempt to give the impression of high trading volumes.

Burford pointed to evidence of "spoofing" and "layering".

Burford's shares were down another 2.4% to 830p on Monday.

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The UK's Financial Conduct Authority (FCA) has previously issued sanctions against the behaviour, including fining a former Bank of America Merrill Lynch trader in 2017, while the US Commodity Futures Trading Commission and Department of Justice (DoJ) have significantly increased their respective civil and criminal enforcement efforts in recent years.

"We think Burford is inappropriately financed", Gotham founder Daniel Yu said in an emailed statement.

Burford today (12 August) said in a statement that a preliminary finding of its analysis of trading shares last week displayed 'evidence consistent with illegal market manipulation.' The statement came after more than £1bn was wiped off the company's value last week after San Francisco-based Muddy Waters published a report suggesting Burford was 'a ideal storm for an accounting fiasco'.

"We will continue to make enquiries using the wide range of data and resources at our disposal", the FCA added. "That mismatch between price movement and executed orders is consistent with market 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.

Burford's legal team consists of Quinn Emanuel's London senior partner Richard East and partner Khaled Khatoun, the firm's NY partners Andrew Rossman and Corey Worcester, as well as Washington, DC-based Michael Liftik and group managing partner John Quinn.

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