Olam International Ltd, the world’s second-largest rice trader, sued investment firm Muddy Waters LLC and its founder Carson Block for defamation after they questioned the commodity supplier’s accounting methods.
Block’s comments in London at a hedge fund conference on Monday were malicious falsehoods, Olam said in a lawsuit filed in the Singapore High Court on Wednesday.
The company sought unspecified damages, costs and an injunction against republication of the comments.
A war of words between Olam and Block began when the Muddy Waters research director accused the Singapore-based company of booking profits on transactions before it was clear how they would work out over time.
Olam chief executive officer Sunny Verghese said on Tuesday the statements were designed to panic shareholders of the company, which is also one of the top three coffee traders globally.
Olam shares dropped 0.6 percent to S$1.685 as of 2:07pm in Singapore, while the benchmark Straits Times Index advanced 0.8 percent. The stock is down 3.2 percent since Block’s initial comments on Monday.
Olam, whose second-biggest shareholder is Singapore’s state-investment company Temasek Holdings Pte, according to data compiled by Bloomberg, said the company was the victim of a concerted short-selling attack.
“We’ve been told several hedge funds had gone and talked to our key investors about why they feel uncomfortable about the company,” Verghese said on Tuesday on a conference call.
Block “is not acting alone” and the company believes he visited Olam’s Singapore office on Nov. 1 in disguise, Verghese said.
“We had to extract his credentials after much frustration. He gave us a false name,” he said.
Short-selling in Olam reached a record on Thursday last week before Block made his initial comments at the London conference.
Block, 36, has successfully bet against Chinese companies that trade in North America after questioning their accounting methods.
One target, treeplantation operator Sino-Forest Corp (嘉漢林業), slumped 74 percent before filing for bankruptcy protection in March.
This is not the first time concerns over Olam’s accounting have been raised.
CLSA Asia Pacific Markets queried the commodity supplier’s accounting and its subsidies from Nigeria in a report issued in February last year, prompting a 9.3 percent slump in its shares.
Olam dismissed the brokerage report and denied the discrepancies raised.