Hedge fund hires former spies to look into Burford

a BattLE over legal firm Burford Capital took a bizarre twist as hedge fund Muddy Waters hired former spies to test its bosses’ statements for lies.

Burford executives’ words were probed by consultant QVerity to ‘measure’ if they were deceptive, as part of Muddy Waters’ wideranging attack on the firm.

QVerity, staffed by former deception experts from US spy agency the Cia, found a ‘significant volume and density of deceptive behaviour’ in Burford’s comebacks to allegations made by the hedge fund, mainly falling into the categories of ‘evasion, aggression and persuasion’.

a Burford spokesman declined to comment, but sources close to the firm described the report as ‘gobbledygook’ and ‘garbage’.

the spat between the firms kicked off last week, when Muddy Waters – which is shortselling Burford’s shares, meaning it profits when they fall – released a market-moving report alleging a number of failures at Burford. it claimed Burford, which helps firms and individuals fund legal cases in return for a cut of any winnings, was manipulating its accounts in order to mislead investors and enrich its management.

Burford has denied all the allegations levelled against it. But QVerity claimed some of those protestations of innocence might be just a little too strong.

in particular it picked at the statement from Burford director John Lazar who said he read Muddy Waters’ dossier ‘knowing there was no smoking gun’.

QVerity’s analysis said what he ‘conveys with this unintended message is that he was told in advance there wasn’t a “smoking gun”, or in other words, concrete evidence of what they’re doing’.

City analysts were unconvinced by the unusual report, with one calling the move ‘utterly bizarre’ and another saying it was ‘total bull **** ’.

Muddy Waters has already made a gross profit of around £12m from shorting Burford.