By Jonathan Stempel
NEW YORK (Reuters) -The Brazilian fintech company XP filed a U.S. lawsuit on Monday accusing the short seller Grizzly Research of defamation over a March 12 report accusing XP of running a “Madoff-like Ponzi scheme.”
In a complaint filed in federal court in Manhattan, XP said it suffered more than $100 million in harm to its business and reputation from the report, with many longtime clients, investors and business partners withdrawing their funds.
It accused Grizzly and its owner Siegfried Eggert of “brazenly, maliciously, and recklessly” publishing the report, with a goal of driving down XP’s stock price so they could profit on short positions.
Grizzly could not be immediately reached by phone or email after business hours, and its website was not accepting messages seeking comment on the lawsuit.
Lawyers for XP did not immediately respond to requests for alternative contact information. XP’s press office in Brazil declined to comment.
Short sellers sell borrowed shares that they hope to repurchase later at lower prices, to replenish lenders, and pocket the difference in price. Other short sellers have been sued in the United States over their alleged defamatory reports.
In its report, Grizzly said XP’s alleged Ponzi scheme involved derivatives sales to retail clients, which were then funneled through special funds and misrepresented as proprietary trading profit.
Grizzly said the alleged scheme was “likely to involve nefarious activities,” and XP would be unprofitable without it.
XP called Grizzly’s claims of impropriety “demonstrably false” because its Gladius and Coliseu funds were proprietary and had no outside investors, and the challenged transactions complied with applicable Brazilian law.
Shares of XP fell 5.5% to $14.14 on March 12 in New York. They closed down 32 cents at $19.48 on Monday.
The lawsuit seeks unspecified compensatory and punitive damages. Madoff refers to the late swindler Bernard Madoff.
The case is XP inc et al v Grizzly Research LLC et al, U.S. District Court, Southern District of New York, No. 25-05564.
(Reporting by Jonathan Stempel in New York; Additional reporting by Patricia Vilas Boas in Sao Paulo; Editing by Leslie Adler)
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