Carson Cutler Block (born April 27, 1977) is an American lawyer, investor,
short-seller
In finance, being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This is the opposite of the more common long position, where the investor will profit if the market value ...
hedge fund
A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...
. He is known for alleging and documenting fraudulent accounting practices in
publicly traded
A public company is a company whose ownership is organized via shares of share capital, stock which are intended to be freely traded on a stock exchange or in over-the-counter (finance), over-the-counter markets. A public (publicly traded) co ...
Chinese companies.
Early life
Block is a native of New York City, and grew up in
Summit, New Jersey
Summit is the northernmost City (New Jersey), city of Union County, New Jersey, Union County, in the U.S. state of New Jersey, located within the New York metropolitan area. Situated on a ridge in north Jersey, northern–central Jersey, centra ...
. His father Bill Block was an equity analyst and ran W.A.B. Capital, an
equity research
Equity may refer to:
Finance, accounting and ownership
*Equity (finance), ownership of assets that have liabilities attached to them
** Stock, equity based on original contributions of cash or other value to a business
** Home equity, the diffe ...
firm that focuses on small cap companies, and his mother Grace Smith works as a
MetLife
MetLife, Inc. is the Holding company, holding corporation for the Metropolitan Life Insurance Company (MLIC), better known as MetLife, and its affiliates. MetLife is among the largest global providers of insurance, Annuity (US financial produ ...
database administrator. His parents divorced when he was six years old. Block has been an atheist since he was in second grade. In middle school, he decided that he wanted to work in finance.
He earned an undergraduate B.S in Business Administration from the
University of Southern California
The University of Southern California (USC, SC, or Southern Cal) is a Private university, private research university in Los Angeles, California, United States. Founded in 1880 by Robert M. Widney, it is the oldest private research university in ...
('98). There, Block studied Chinese and Business (focusing on Finance). He moved to China after college, in 1998.
Block later returned to the United States, and worked in investment banking for nine months in 1999 for the Los Angeles office of
CIBC World Markets
CIBC Capital Markets is the investment banking subsidiary of the Canadian Imperial Bank of Commerce. The firm operates as an investment bank both in Canadian and global equity and debt capital markets. The firm provides a variety of financial se ...
. He then went to work with his father during 1999 to 2002, a period he describes as “very embittering” as he was “lied to by a parade of management” of internet companies. He quit equity analysis for law school.
He then attended
Chicago-Kent College of Law
The Chicago-Kent College of Law is the law school of the Illinois Institute of Technology, a private research university in Chicago, Illinois. It is the second oldest law school in the state of Illinois (after Northwestern Law).
Chicago-Kent wa ...
, from which he holds a J.D. degree ('05). He is an adjunct professor at the law school.
Career
After graduating from law school, Block moved back to
Shanghai
Shanghai, Shanghainese: , Standard Chinese pronunciation: is a direct-administered municipality and the most populous urban area in China. The city is located on the Chinese shoreline on the southern estuary of the Yangtze River, with the ...
, China, and worked in mergers and acquisitions and foreign direct investment for law firm Jones Day from 2005 until 2006. He lived in Shanghai until 2010. He left Jones Day and the practice of law to co-author a book with Robert Collins entitled ''Doing Business in China for Dummies''. He also established a
self-storage
Self storage (a shorthand for "self-service storage") is an industry that rents storage space (such as rooms, lockers, shipping containers, and/or outdoor space), also known as "storage units," to tenants, usually on a short-term basis (o ...
business in China in 2007.
He founded Muddy Waters Research, an investor research firm and
hedge fund
A hedge fund is a Pooling (resource management), pooled investment fund that holds Market liquidity, liquid assets and that makes use of complex trader (finance), trading and risk management techniques to aim to improve investment performance and ...
, and became known for alleging and documenting fraudulent accounting practices in
publicly traded
A public company is a company whose ownership is organized via shares of share capital, stock which are intended to be freely traded on a stock exchange or in over-the-counter (finance), over-the-counter markets. A public (publicly traded) co ...
Chinese companies that were trading in North America, and as a
short-seller
In finance, being short in an asset means investing in such a way that the investor will profit if the market value of the asset falls. This is the opposite of the more common long position, where the investor will profit if the market value ...
.
He targeted Chinese
forest plantation
A tree plantation, forest plantation, plantation forest, timber plantation, or tree farm is a forest planted for high volume production of wood, usually by planting one type of tree as a monoculture forest. The term ''tree farm'' also is used to ...
operator company Sino-Forest in 2011, accusing it of overstating its timber holdings. The company ultimately filed for bankruptcy.
In 2011, Block was ranked as a 50 Most Influential Thinker by
Bloomberg Markets
''Bloomberg Markets'' is a magazine published six times a year by Bloomberg L.P. as part of Bloomberg News. Aimed at global financial professionals, ''Bloomberg Markets'' publishes articles on the people and issues related to global financial m ...
.
Block was featured in the 2015 book by Richard Teitelbaum entitled ''The Most Dangerous Trade: How Short Sellers Uncover Fraud, Keep Markets Honest, and Make and Lose Billions.'' In September 2017, he initiated a private lawsuit against
Equifax
Equifax Inc. is an American multinational consumer credit reporting agency headquartered in Atlanta, Atlanta, Georgia and is one of the three largest consumer credit reporting agency, consumer credit reporting agencies, along with Experian and T ...
, accusing it of neglecting to safeguard his
personally identifiable information
Personal data, also known as personal information or personally identifiable information (PII), is any information related to an identifiable person.
The abbreviation PII is widely used in the United States, but the phrase it abbreviates has fou ...
. He appears in the 2017 financial documentary '' The China Hustle'', outlining his research into
securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a deceptive practice in the stock or commodities markets that induces investors to make purchase or sale decisions on the basis of false information.St. Jude Medical Inc.
As of April 2021, eight of the companies that Block had exposed as being fraudulent had been delisted from stock exchanges, and two other such companies had settled charges with their regulators. Over the prior five years, Muddy Waters had annualized returns of 19% (after a
management fee
In the investment advisory industry, a management fee is a periodic payment that is paid by an investment fund to the fund's investment adviser for investment and portfolio management services. Often, the fee covers not only investment advisory ser ...
(2.5%) and a
performance fee
A performance fee is a fee that a client account or an investment fund may be charged by the investment manager that manages its assets in addition to its management fee.
A performance fee may be calculated many ways. With respect to a separa ...
(30%)).
In 2022, Block wrote a
white paper
A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. Since the 199 ...
entitled "Distorting the Shorts," in which he said that Columbia associate professor Joshua Mitts, who had authored research about short sellers which argued that some short activism was
market manipulation
In economics and finance, market manipulation occurs when someone intentionally alters the supply or demand of a security to influence its price. This can involve spreading misleading information, executing misleading trades, or manipulating ...
, had written research that was “greatly flawed, possibly to the point of being fraudulent”. He called the work by Mitts "a non-empirical, conflict-laden polemic based on misrepresentation, selective presentation of data, and lack of academic integrity. He submitted the paper to the
Securities and Exchange Commission
The United States Securities and Exchange Commission (SEC) is an independent agency of the United States federal government, created in the aftermath of the Wall Street crash of 1929. Its primary purpose is to enforce laws against market m ...