Financial investor Carl Icahn accused of concealing massive loan sums
The investigation was initiated after a critique from Short-Seller Hindenburg Research, which led to a significant drop in shares for Carl Icahn's investment firm last year. According to Hindenburg, Icahn had been using fresh investor funds to cover dividends for existing investors, a practice similar to a Ponzi scheme that relies on an endless influx of new investors.
This financial downturn resulted in a loss of $2.9 billion from Icahn's wealth, leaving him with an estimated $14.7 billion, as per Forbes.
The SEC accused Icahn, who served as inspiration for the Wall Street villain Gordon Gekko in the 1987 film "Wall Street", of commiting financial fraud. Icahn allegedly pledged up to 82% of his company's shares as collateral to secure billions in margin loans, a fact he failed to disclose to investors.
"These undisclosed details would have revealed that Icahn had frequently promised more than half of IEP's outstanding shares as collateral at any given time," said Osman Nawaz, head of the SEC Enforcement Division's Complex Financial Instruments Unit, in a statement. This failure to disclose information hampered existing and potential investors' ability to make informed decisions.
Icahn's Florida-based company manages investments in various sectors such as energy, automotive, food packaging, real estate and more. Icahn holds an 85% stake in IEP, making him its controlling shareholder.
Icahn and his company agreed to pay a settlement fee of $1.5 million and $500,000 in civil penalties to settle the charges, as per the SEC's statement.
In a response, Icahn claimed that the settlement demonstrated the baselessness of Hindenburg's accusations.
"Hindenburg's tactic of making unsubstantiated allegations proved detrimental to IEP and its investors," Icahn said. "We are delighted to put this issue to rest and are committed to focusing on the business for the benefit of our shareholders."
Icahn's response to the SEC settlement highlighted the negative impact of Hindenburg's allegations on his investment firm, stating, "Hindenburg's tactic of making unsubstantiated allegations proved detrimental to IEP and its investors." Furthermore, to continue growing his business and benefit his shareholders, Icahn expressed his intention to focus on investing in various sectors such as energy, automotive, and real estate.
