Silvercorp Metals has filed an amended lawsuit in the Supreme Court of the State of New York, adding EOS Holdings LLC, Jon Carnes, Zane Heilig, Andrew Wong and International Financial Research & Analysis Group (IFRA), as defendants. The original claim, filed September 22, 2011, alleges that defendants Chinastockwatch.com, Jerry Katz, Alfredlittle.com, Alfred Little, Simon Moore and several “John Doe” defendants with spreading “false, defamatory and fraudulent” information about Silvercorp on the Internet and in letters to the media and regulators to drive down the price of Silvercorp’s stock to profit from their short positions in the stock. The defendants have not yet answered the Silvercorp’s suit and the allegations remain to be proved.
According to Silvercorp, Carnes is the president of EOS Holdings LLC, which he founded in 1992. Heilig is the director of Research at EOS, and has worked for Carnes for many years. On March 29, 2011, Carnes, Heilig, IFRA, and EOS were allegedly involved in the publication of a press release in the name of “Alfred Little” relating to another company called China Integrated Energy through the PR Newswire service. PR Newswire’s records show that the Heilig’s 72 year old mother “authorized” the “Alfred Little” release, and gave as contact phone numbers for the release the Vancouver phone number of defendants Heilig, Carnes, and EOS. Heilig’s mother also gave PR Newswire, as an additional contact phone number, the Hong Kong phone number of Andrew Wong is a Senior Analyst at IFRA. Furthermore, Heilig’s mother hand-wrote the check to pay PR Newswire for running the “Alfred Little” release using funds forwarded by Heilig.
A Shanghai-based analyst with IFRA named “Dino” Huang admitted in an interview with the Globe and Mail, that IFRA had prepared the “Alfred Little” report attacking Silvercorp on which this law suit is based. The IFRA analyst further admitted that IFRA prepared the report on behalf of an “unnamed hedge fund” that had shorted Silvercorp stock, and thus would profit if the stock price dropped.
In two separate anonymous affidavits recently filed on behalf of “Alfred Little” in New York Court in the Sino Clean and Deer litigation against “Alfred Little” arising from similar short-and-distort stock manipulations, “Alfred Little” swore under oath that he has “used” IFRA to carry out his activities. (“Alfred Little” swore to the affidavits before a notary at the U.S. Consulate in Shanghai, but then redacted his name and signature before submitting the affidavits to the Court.)
Silvercorp has alleged that, beginning on August 29, 2011 and continuing up to the present, defendants have posted on the chinastockwatch.com and alfredlittle.com websites and sent anonymous letters to the British Columbia Securities Commission, the Ontario Securities Commission, Silvercorp’s auditors at Ernst & Young, and various financial media outlets that falsely and maliciously allege that Silvercorp’s financial statements and its resource deposits were overstated, among other false and defamatory statements. Following these statements, Silvercorp’s stock price dropped sharply—as much as 20% in a day on unusually high trading volumes—before partially recovering as Silvercorp came forward with information in the form of bank statements, government records and other documents to rebut the defendants’ false allegations.