Companies in $450M legal battle over short-selling ‘conspiracy’
TORONTO — Catalyst Capital Group Inc. is suing West Face Capital Inc. and Anson Group Canada, accusing the hedge fund and asset manager of allegedly spreading misinformation and launching a short-selling campaign against its publicly traded subsidiary.
The Toronto-based private equity fund is seeking $450 million in damages for defamation and other claims, according to its statement of claim filed Tuesday in the Ontario Superior Court of Justice.
Catalyst alleges that West Face and Anson Group, both based in Toronto, and several other associated individuals acted as “wolfpack conspirators” against its asset-based lender Callidus Capital Corp. by spreading false information “through the Bay Street rumour mill” and to the media.
It also alleges that individuals who received loans from Callidus acted as “conspirators” as well and filed false whistleblower complaints to the Ontario Securities Commission to confirm the rumours.
Catalyst’s allegations include that West Face, Anson and several other parties also either directly or indirectly took short positions on Callidus shares. It also alleges that all the conspirators timed a media report about the complaints to be released near the end of a trading day, causing Callidus shares to fall sharply, and allowing parties to close out their short positions at a profit.
“The conspiracy required very sophisticated co-ordination and perfect timing under the hand of the Wolfpack Conspirators,” says the statement of claim. “This pattern has been honed through repetition in other situations.”
None of the allegations have been proven in court.
West Face said Wednesday that the allegations are “completely devoid of merit” and will defend them “vigorously at every turn.”
“West Face has not shorted the shares of Callidus in more than two years,” it said in a statement. “Moreover, West Face has had no discussions with Anson Group concerning any investment that Anson may have made in Callidus.”
A spokesman for Catalyst declined to comment, and representatives of Anson did not immediately respond to requests.