Billionaire Carl Icahn Settles Charges for Failing to Disclose Billions in Loan Collateral
Billionaire investor Carl Icahn and his firm, Icahn Enterprises, have reached a settlement with the U.S. Securities and Exchange Commission (SEC) over charges that they failed to disclose the use of the company’s securities as collateral for billions of dollars in personal loans. The settlement, announced on Monday, follows a significant drop in Icahn Enterprises’ stock last year after a report from Hindenburg Research.
Hindenburg Research had accused Icahn of using new investor funds to pay dividends to existing investors, likening the practice to a Ponzi scheme. The report led to a sharp decline in Icahn Enterprises’ share price, wiping $2.9 billion off Icahn’s net worth, which now stands at an estimated $14.7 billion, according to Forbes.
The SEC’s investigation revealed that Icahn had pledged up to 82% of shares in his companies to secure substantial margin loans but did not disclose these pledges to investors. The lack of disclosure meant that existing and potential investors were unaware that more than half of Icahn Enterprises’ outstanding shares were being used as collateral at any given time.
“These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time,” said Osman Nawaz, head of the SEC Enforcement Division’s Complex Financial Instruments Unit. “Investors were deprived of essential information that could have impacted their investment decisions.”
Icahn, whose company manages investments across various sectors including energy, automotive, and real estate, is the controlling shareholder of Icahn Enterprises with an 85% stake. In response to the settlement, Icahn criticized Hindenburg Research, stating that their allegations were baseless and had caused undue harm to Icahn Enterprises and its investors.
“Hindenburg’s modus operandi, which is to publish scurrilous and unsupported allegations, did damage to IEP and its investors,” Icahn said. “We are glad to put this matter behind us and will continue to focus on operating the business for the benefit of unit holders.”
As part of the settlement, Icahn and his company agreed to pay civil penalties of $1.5 million and $500,000, respectively.
