Billionaire investor Carl Icahn and his firm Icahn Enterprises have settled charges for failing to disclose pledges of the company’s securities as collateral for billions of dollars in personal loans, US regulators said Monday.
The investigation came after a report from short-seller Hindenburg Research sent shares in Icahn’s investment firm spiraling last year. Hindenburg wrote that “Icahn has been using money taken in from new investors to pay out dividends to old investors. Such Ponzi-like economic structures are sustainable only to the extent that new money is willing to risk being the last one ‘holding the bag.’”
The subsequent plunge in IEP shares wiped $2.9 billion off Icahn’s net worth, leaving him with an estimated $14.7 billion, according to Forbes.
The Securities and Exchange Commission said Icahn, who partially inspired Wall Street villain Gordon Gekko in the 1987 film “Wall Street,” pledged up to 82% of shares in his companies to secure billions of dollars of margin loans — but failed to disclose those details.
“These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time,” said Osman Nawaz, head of the SEC Enforcement Division’s Complex Financial Instruments Unit, in a statement Monday. That left existing and prospective investors “deprived of required information.”
Icahn’s Sunny Isles Beach, Florida-based company holds his various investments in the energy, automotive, food packaging, real estate and other industries. He is IEP’s controlling shareholder with an 85% stake.
Icahn and his company agreed to pay $1.5 million and $500,000 in civil penalties, respectively, to settle the charges, the SEC said in a statement.
Icahn said in a statement the settlement showed Hindenburg’s allegations were without merit.
“Hindenburg’s modus operandi, which is to publish scurrilous and unsupported allegations, did damage to IEP and its investors,” Icahn said Monday. “We are glad to put this matter behind us and will continue to focus on operating the business for the benefit of unit holders.”
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