Muddy Waters Sued Over Report Linking Solutions 30 to Crime

Muddy Waters Capital LLC was accused in a lawsuit of profiting from shorting Solutions 30 SE while targeting the European technology services company in an “aggressive and baseless” campaign.

A Romanian company that provides back-office support for Solutions 30 said in the complaint that Carson Block’s research firm anonymously published a report alleging that Solutions 30 had multiple links to criminals and ties to money laundering.

Solutions 30’s shares slumped as much as 37% in December after the Luxembourg-based company said it hired an external auditor to review the allegations in the report. The stock soared as much as 37% on April 1 after the company said an independent auditor confirmed the allegations are unfounded.

“The extreme and irresponsible language from the report, and the commentary about it, echoed through the blogosphere, just as defendants planned,” according to the complaint filed Friday in San Francisco federal court. The lead plaintiff, Solutions 30 Eastern Europe, said the “sole purpose of this short-selling scheme” was to secure a quick, improper windfall.

Muddy Waters held a short position on Solutions 30 since about May 2019, according to the lawsuit.

The Romanian company also accuses Block of publicly smearing its Italian founder, Federico Salmoiraghi, in an open letter published in January and circulated on social media. Salmoiraghi and his company said the allegations of wrongdoing are false.

“We look forward to bringing more of Mr. Salmoiraghi’s activities into the light of day,” Block said Monday in an emailed statement.

A lawyer for Salmoiraghi and his company didn’t immediately respond to a request for comment.

Solutions 30, which isn’t a plaintiff in the case, declined to comment.

The case is Solutions 30 Eastern Europe v. Muddy Waters Capital LLC, U.S. District Court, Northern District of California (San Francisco).

©2021 Bloomberg L.P.

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