Billionaire activist investor Carl Icahn and his company, Icahn Enterprises, have agreed to pay a combined $2 million to settle charges brought by the Securities and Exchange Commission (SEC).
Icahn allegedly failed to disclose that he pledged between 51 percent and 82 percent of Icahn Enterprises’ outstanding shares as collateral to obtain personal margin loans “worth billions of dollars,” according to an SEC press release Monday.
Icahn Enterprises did not disclose his pledges until February 2022, while the billionaire failed to detail his margin loan agreements until July 2023, the agency said. He will pay $500,000 in civil penalties, while his company will pay $1.5 million.
“The federal securities laws imposed independent disclosure obligations on both Icahn and IEP,” Osman Nawaz, chief of the SEC Enforcement Division’s Complex Financial Instruments Unit (CFIU), said in a statement.
“These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time,” he continued. “Due to both disclosure failures, existing and prospective investors were deprived of required information.”
The SEC settlement comes after the short-selling firm Hindenburg Research released a report last year alleging that Icahn Enterprises was using inflated asset valuations and had “ponzi-like” dividends.
“After Hindenburg issued a false report to make money on its short position at the expense of ordinary investors, the government investigation that followed has resulted in this settlement which makes no claim IEP or I inflated NAV or engaged in a ‘Ponzi-like’ structure,” Icahn said in a statement.
“Hindenburg’s modus operandi, which is to publish scurrilous and unsupported allegations, did damage to IEP and its investors,” he added. “We are glad to put this matter behind us and will continue to focus on operating the business for the benefit of unit holders.”
