Carl Icahn to Pay $2 Million to Settle SEC Claims
Date: 2024-08-21 Author: Alex Crawford Categories: PEOPLE
Carl Icahn and his company Icahn Enterprises LP have reached a settlement with the SEC and will pay a $2 million fine for violations related to failing to disclose that they pledged the company’s securities as collateral for personal loans.
Hidden Collateral and Failure to Commit
Carl Icahn and his company Icahn Enterprises LP (IEP) are under investigation for failing to disclose that they pledged most of their company’s stock as collateral for personal margin loans, according to a filing with the SEC. As part of the settlement, Icahn will pay $1.5 million in civil penalties, and his company will pay an additional $500,000.
Osman Nawaz, head of the SEC’s Complex Financial Instruments Unit, said federal securities laws require companies and their executives to make timely disclosures. According to Nawaz, Icahn pledged between 51% and 82% of IEP’s outstanding shares at various times.
The company was required to disclose this information in its annual report by February 25, 2022. However, by failing to do so, current and potential investors were deprived of important information.
The SEC said Icahn used the pledged securities to obtain billions of dollars in personal margin loans from various lenders. He also failed to file a required amendment to a Form 13D that would have detailed his personal margin loans.
Ponzi Allegations
Icahn’s actions were the subject of an investigation after a report from research firm Hindenburg Research accused him of inflating the value of the company’s assets. The report sent IEP’s stock down 20%. In a statement, Hindenburg alleged that the company’s assets were overvalued and used to pay dividends in a Ponzi-like scheme.
Icahn responded to the allegations by arguing that Hindenburg’s report was false and intended to profit from lower stock prices, harming ordinary investors. He emphasized that the government’s investigation, which led to the current settlement, found no evidence of inflated stock values or a Ponzi scheme.
However, Hindenburg continues to stand by his allegations, arguing that the company continues to incur losses despite its inflated valuation.
IEP’s stock fell 7.4% to $16.18 on the news.
Icahn amassed a significant stake in Caesars, the largest casino and entertainment company in the U.S., after helping to broker a $17.3 billion merger with Eldorado Resorts four years ago. In early August, Caesars Entertainment announced it was selling the World Series of Poker intellectual property rights to NSUS Group Inc.
