Burford Capital has launched a legal attempt to force the London Stock Exchange to disclose the identities of traders the litigation funder says manipulated its share price.
The company said it had sought approval from the High Court to obtain “further information about orders in Burford shares” from the LSE.
After an attack in early August by US short-seller Muddy Waters prompted a two-day stock plunge of more than 50 per cent, Burford said preliminary analysis of trading data had revealed “activity consistent with material illegal activity”.
On Monday it published a full report commissioned from Joshua Mitts, a Columbia University academic specialising in short selling analysis.
Mr Mitts’ study alleges evidence of practices known as “spoofing” and “layering” — traders making and cancelling orders to influence share prices — which he said “caused an artificial decline in Burford’s share price”.
Burford’s legal application against the LSE said the company had brought the proceedings so it could “seek redress from those responsible”.
Muddy Waters, the prominent US hedge fund headed by Carson Block, sparked the slide in the litigation funder’s shares with an August 6 tweet saying it would announce a new short position on “an accounting fiasco that’s potentially insolvent and possibly facing a liquidity crunch”.
It accelerated the sell-off the next day when it released its report naming Burford, which it said was a “poor business masquerading as a great one”.
Burford’s share price fell 56 per cent over the two days, wiping £1.7bn off its market capitalisation.
Mr Block said on Monday that Burford was “recycling this spoofing and layering quasi-allegation to distract attention from the real issues”.
“Spoofing and layering are issues that have arisen in the high-frequency and computer-driven trading world, and Muddy Waters has zero capability to engage in these practices,” he added.
In the legal documents submitted to the High Court, Burford said that “by providing the market and trading platforms on which the unlawful manipulation of Burford’s share price took place”, the LSE “was mixed up in and facilitated that wrongdoing”.
Burford said it had requested the information from the LSE on September 20. It said it had decided to “move immediately forward to issue the . . . proceedings” on the basis of “the seriousness of the matters raised” and “the obvious likelihood that the LSE would require a court order” to disclose the information.
The LSE declined to comment on the case. However, it said the “competent authority” for investigating allegations of market abuse was the Financial Conduct Authority, and that “London Stock Exchange provides any information the FCA requires from it for the purposes of their investigations”.
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