Elon Musk cheers on Justice Department probe of short sellers
The DOJ probe, according to The Wall Street Journal, is focusing on alleged instances of so called “spoofing” and “scalping.” Spoofing involves illegally using fake orders to pump or crash a stock price while scalping refers to when activist investors close out their positions without disclosing that move.
Muddy Waters Research founder Carson Block, a vocal critic of Musk’s who has shorted Tesla stock, is reportedly among the investors who have been served search warrants by federal investigators in the short-seller probe.
Block said in a statement to the Journal: “I’ve been saying for several years that it is critical for all stakeholders in the ecosystem to develop sophisticated data analysis capabilities to detect problematic trading. It’s dangerous to outsource these analyses to nonpractitioners.”
The New York Times reported last year that Block was moving on from shorting the electric vehicle giant. In a letter the Times obtained, Block explained his decision to allies by saying “the market cap, the luster, the élan of Elon, is still there.”
Andrew Left, another one-time Tesla short, had his computers seized by federal agents, according to Bloomberg. Left said in 2020 that he was shorting the company’s stock.
Musk’s war with short sellers goes beyond advocating for his company. He spoke out against shorts during the GameStop stock frenzy last year, when large groups of retail investors on Reddit helped pump the stock up 1,500% in two weeks.
“u can’t sell houses u don’t own u can’t sell cars u don’t own but u *can* sell stock u don’t own!? this is bs — shorting is a scam legal only for vestigial reasons,” Musk said in a tweet in January 2021.
