Silvercorp uses Chinese police to silence and suppress censorious short-sellers

Silvercorp Metals (TSX/NYSE:SVM) is alleged to have procured the assistance of police in arresting and silencing critics of the company who sought to profit from the short-selling of its stock.

The Globe and Mail reports
that documents obtained by the paper suggest local Chinese law enforcement may have arrested 35 year-old Canadian national Huang Kun at the behest of Silvercorp executives, with the Toronto-listed Sino-Canadian silver miner footing the bill for the investigation.

On 28 December Huang Kun was arrested in Beijing while two of his colleagues were arrested in the city of Luoyang. The three men were responsible for a censorious research report which is believed to have triggered a 20% single-day price decline for Silvercorp on the Toronto Stock Exchange.

The Globe and Mail further alleges that Huang's arrest is part of a concerted effort by Chinese firms to mete out harsh punishment to North American short-sellers, who obtain extravagant profit from declines in the share prices of shaky PRC companies listed on overseas exchanges.

The PRC's official Xinhua news agency published an opinion piece last week which was scathingly critical of overseas short-sellers and extolled efforts by Chinese entrepreneurs to deal with such "malicious act(s)."

In a piece entitled "Applaud Chinese entrepreneurs for uniting against short-sellers", Xinhua staff writer Ren Ke praised a group of 61 Chinese entrepreneurs, including former Microsoft and Google executive Kai-fu Lee, for coming together to censure research firms who "maliciously" publish "erroneous reports" in a bid to put pressure on the prices of US-listed Chinese firms for their own profit.

Shares in Silvercorp ended the Monday trading session down 3.21% on the Toronto Stock Exchange.