Some Wall Street investors have made a profession out of exposing companies with shoddy or even fraudulent operations while betting that their share prices will fall. But Justice Department officials have been looking into whether some of these activist investors, known as short sellers, may be taking their tactics too far.
Prominent short sellers including Carson Block and Andrew Left have received search warrants as part of an ongoing investigation into possible manipulation of stock prices, according to two people familiar with the investigation. Details of the investigation were reported earlier by Bloomberg News and The Wall Street Journal.
Mr. Block, the founder of Muddy Waters Research, was served with a search warrant in the fall, according to one person familiar with the investigation. A second person familiar with the investigation said Mr. Left, who runs Citron Research, also had records seized under a search warrant early last year. The people spoke on the condition of anonymity because the details of the investigation were not public.
Subpoenas issued to several investors as part of the inquiry have asked about the sharing of information between activists betting against companies, according to two people familiar with the matter.