The Bear Cave #148

New Activist Reports, Recent Resignations, and Tweets of the Week

Dec 18, 2022

Welcome to The Bear Cave! Our last premium articles were “Problems at Silvergate Capital (SI)” published on December 1 and “Problems at Six Flags Entertainment (SIX)” published on December 15. The next premium investigation comes out Thursday, January 5.

New Activist Reports

Marcus Aurelius Research published a Twitter thread on Silvergate Capital (NYSE: SI — $588 million), a bank holding company that has processed over $1 trillion in transactions for the crypto industry. Marcus Aurelius Research highlighted that Silvergate does payment processing for Bitso, a Mexican crypto operator that has been tied to blackmail, sex trafficking, and kidnapping payments. Bitso also advertised that its customers can move money worldwide “as easy as ordering a pizza” and users have “total protection” because Silvergate Bank is FDIC insured. Marcus Aurelius Research also later discovered that crypto platform Binance solicited depositors via a Seychelles shell company at Silvergate Bank.

The Bear Cave previously published on Silvergate and highlighted the bank’s troublesome payment processing operations for FTX and the company’s business with Joel Greenberg, who later pled guilty to six federal charges including sex trafficking a minor. The Bear Cave wrote,

“Silvergate’s potential regulatory infractions, shrinking deposit base, and diminishing credibility are not being fully recognized by the market.”

Muddy Waters Research published on Vivion Investments, a privately owned European real estate investment company. Muddy Waters said it was short the company’s credit and alleged the company’s “controlling shareholders have used bond sale proceeds to unduly enrich themselves.” Muddy Waters also alleged that the company “inflates the values of its real estate portfolios through fair value gains,” exaggerates occupancy rates, and “appears to use related parties to inflate its rent income.”

Following the Muddy Water report, the Financial Times published an article on additional irregularities in the company’s financial statements and wrote,

“Vivion’s calculation of non-current liabilities for June 30 is incorrect. Instead of the €3,961,851,000 listed, the line items actually sum to €3,691,851,000. This suggests that Vivion got its 6 and 9 muddled up…. The usual question in these sort of situations is: why did the auditor not catch this? The simple answer is that the financial statements are unaudited.”

The company said the matter was “simply a clerical error.”

White Diamond Research published on Know Labs Inc (NYSE: KNW — $50 million), a medical device company focused on blood glucose monitoring. White Diamond called the company “a blatant and obvious medical device scam” and noted that the company’s only doctor is a 76-year-old who has multiple jobs outside the company. White Diamond also highlighted that the company’s only material source of revenue appears to be roughly $4.3 million in NFT sale proceeds that “were deposited in the CEO’s personal digital accounts.”

Recent Resignations

Notable executive departures disclosed in the past week include:

CEO of Barings BDC (NYSE: BBDC — $895 million) “will step down to pursue other business opportunities” just three months after being elevated into the position. Two weeks ago, the company’s chief compliance officer resigned after about three months as well.
CFO of QualTek Services (NASDAQ: QTEK — $26 million) “separated with the company” after one and a half years. The company is down ~95% since its February 2022 SPAC merger. Four board members have also resigned since the SPAC merger was completed.
CFO of Jack in the Box (NASDAQ: JACK — $1.44 billion) departed after two years “for personal reasons.” The company has had five different CFOs over the last five years.
CEO of Chimera Investment Corporation (NYSE: CIM — $1.43 billion) “separated” from its CEO after two years. The outgoing CEO also is leaving the company’s board.
CEO of Pediatrix Medical Group (NYSE: MD — $1.23 billion) was “terminated” after two and a half years. In October, the company’s general counsel departed after almost three years and in June the company’s President of Pediatrix and Obstetrix Medical Groups departed after about three years.
CEO of Digital Realty Trust (NYSE: DLR — $29.2 billion) was “terminated without cause effective immediately” after eight years with the company and also departed the board.
Chief Revenue Officer of ADT Inc (NYSE: ADT — $8.34 billion) departed after one and a half years.
President of Ammo Inc (NASDAQ: POWW — $213 million) resigned after one and a half years. In September, The Bear Cave published on the company and wrote, “a former NASCAR star and NRA executive currently sit on the board, an alleged pump-and-dump artist is listed as a key employee, a former board member raised concerns about whistleblower retaliation, and a current board member is running a proxy fight against his fellow board members.”

Data for this section is provided by VerityData from VerityPlatform.com

What to Read

“Bob Iger vs. Bob Chapek: Inside the Disney Coup” (WSJ)

“By October, relations between Ms. McCarthy and Mr. Chapek were so frayed that he didn’t include her in a board meeting. He also told executives that she had lost focus, distracted by her husband’s ailing health, and had become unstable, comments repeated to some Disney directors. Ms. McCarthy learned about it from colleagues.”

“SEC Charges Financial Services Professional and Associate in $47 Million Front-Running Scheme” (SEC)

“The Securities and Exchange Commission today announced fraud charges against Lawrence Billimek, an employee of a major asset management firm with securities portfolios worth billions of dollars, and Alan Williams, who previously worked at several financial industry firms, for perpetrating a multi-year front-running scheme that generated at least $47 million in illegal trading profits….”

“SEC Charges Eight Social Media Influencers in $100 Million Stock Manipulation Scheme Promoted on Discord and Twitter” (SEC)

“These seven defendants allegedly purchased certain stocks and then encouraged their substantial social media following to buy those selected stocks by posting price targets or indicating they were buying, holding, or adding to their stock positions. However, as the complaint alleges, when share prices and/or trading volumes rose in the promoted securities, the individuals regularly sold their shares without ever having disclosed their plans to dump the securities while they were promoting them…”