The identity of an anonymous short seller whose report led to turmoil for China Zhongwang Group as well as drawing regulators’ attention to the trade disparities between the United States and China is anonymous no more.
In an interview with financial media on Thursday, Carson Block revealed that his firm Muddy Waters Research LLC used the nom de plume “Dupré Analytics” to reveal to the world the existence of a stockpile of aluminium in Mexico and detail the ties it allegedly has to Liu Zhongtian, China Zhongwang’s founder, via Aluminicaste Fundición de México S. de RL de CV, which Dupré’s research tied to Liu’s son.
According to reporting in the Wall Street Journal, Block intended to make public his company’s involvement in the course of a lawsuit filed against Dupré by Perfectus Aluminum Inc., whom Dupré ties to the alleged fraud by Liu and Zhongwang in its report.
The report, which led to the seizure by the United States government of US$25 million of aluminium owned by Perfectus, also led to a civil suit initiated by the United States Justice Department against the company alleging it of evading US$1.5 billion in tariffs by smuggling aluminium into the States.
In addition to intense interest from American law enforcement, Dupré’s allegations that Liu and his family have been skimming profits from the company since 2011 and that the company allegedly purchased tens of billions of dollars of its own product via companies with undisclosed ties to Liu caused it to request its shares be suspended on the Hong Kong stock exchange until the firm could issue a response two weeks later.
Block stands by his report, saying it is “the greatest research we have ever done” and calling attention to his contention that the take-away from his firm’s work is that Chinese banks allegedly made billions in loans to their U.S. counterparts to finance Chinese companies’ efforts at going around U.S. customs controls to sell cut-rate aluminium.
While continuing to support the findings detailed in Dupré’s report, Block says he struggled with the decision to publish the report anonymously. Though he says safety concerns motivated the choice, the decision was a difficult one as he believes it reduced the report’s impact as well as depriving Muddy Waters credit for its work.
In a press release sent to Aluminium Insider, Zhongwang blasted Muddy Waters in the harshest of terms.
“Muddy Waters only disclosed its duplicitous role in creating the baseless report when facing litigation that would expose its identity. The claim by Muddy Waters’ founder that he used a fictitious identity to publish the DA Report because of ‘safety concerns’ is absurd and outrageous, and is merely a pretext to try to mask the integrity and the professional conduct issues involved in such an act.”
The release continued by making several declarations, citing a response issued in the late summer of 2015 purporting to address Dupré’s findings, which it says it continues to affirm as an effective rebuttal to Dupré’s accusations. Zhongwang also accuses Muddy Waters of committing a “deceitful act” in publishing the report as Dupré, and wonders aloud whether doing so, which Zhongwang believes is out of character with Muddy Waters’ usual practice, may indicate the participation of others who “manipulated” Dupré’s report.
Insisting that it has at no time acted outside the law and always following “the principle of fair and orderly competition,” Zhongwang closes by saying that it will monitor the situation, reserving its legal rights in connection with the “false accusations” by Dupré.
Perfectus declined to comment when queried by the Wall Street Journal. Representatives for both China Zhongwang and Liu Zhongtian have consistently gone on record in the past unequivocally denying all accusations of impropriety leveled against their principals.