Last Sane Man on Wall Street
New York magazine|January 17 - 30, 2022
Nathan Anderson made his name exposing—and betting against—corporate fraud. But short selling in a frothy pandemic economy can be ruinous.
By Andrew Rice. Photographs by Philip Montgomery, Massimo Pinca and Reuters

ONE DAY, a man with dreams of riches placed a truck on top of a hill. The vehicle was a big white tractor-trailer, a prototype built by an automotive start-up called Nikola. The company’s boastful founder, Trevor Milton, claimed it was the “holy grail” of the commercial-trucking industry, a semi that ran on hydrogen and was both green and powerful, capable of doing thousand-mile hauls with zero carbon emissions. In reality, the truck had no engine. It was towed up a straight two-lane road. Its driver released the brakes, and it rolled down the hill under the force of gravity, like a child’s wagon. The road had a 3 percent grade, gentle enough that with some creative camerawork, the prototype would appear to be barreling across a flat desert landscape.

On January 25, 2018, Nikola’s official Twitter account posted a swooshing 39-second video of the demonstration. “Behold,” it declared, “the Nikola One in motion.”

Four years and one federal criminal indictment later, the story of the engineless truck can be seen in many ways: as the high point of a scandal at an automaker that briefly had a market cap larger than Ford’s; as a manifestation of this era’s fakeit-till-you-make-it, flack-it-till-you-SPAC-it business ethos; as a cautionary tale of social media’s power to intoxicate the stock-trading masses; as yet another indicator that the market has become detached from reality; and maybe even as a big honking metaphor for an entire economy that is rolling down a hill, inflating, going deranged as crypto wizards conjure imaginary fortunes, companies without a hint of revenue reach multibillion-dollar valuations, and our richest men blast off into outer SPACe.

On a practical level, though, the rolling truck was the killer detail—the spark that incinerated a high-flying stock to the career-making benefit of Nathan Anderson, the proprietor of Hindenburg Research.

Anderson belongs to a cranky cohort of “activist” short sellers. They make money by taking positions in the stocks of shaky or shady companies, which pay off if the price goes down—an outcome the shorts hasten with public attacks, publishing investigations on their web platforms and blasting away at their targets (and sometimes at one another) on Twitter. To their many powerful enemies, they are little more than internet trolls, a fun-house-mirror image of the day-trading dumbasses on Reddit who drive up meme stocks for the lolz. Anderson prefers to think of himself as a private detective, identifying mischief and malfeasance that might otherwise go undetected by snoozing regulators. He used to poke around in shadowy corners, but lately he has been seeing fraud sitting right in the blazing light of day.

“The scale of it is quite massive,” the lanky, bearded 37-year-old told me when we first met one sultry morning in August. “I don’t think any system can sustain itself with that scale of grifts happening.”

A hurricane was on the way, and we had arranged to meet up for breakfast at a café near his apartment on the Upper West Side. “The market’s crazy,” Anderson said laconically. “Dogecoin is worth, like, $40 billion. In this economy, a company, regardless of whether it is complete trash, can shoot up 1,000 percent.” Anderson said he was just back from a conference in San Francisco, a rare in-person gathering of around 30 short-selling activists—“the remaining survivors,” he joked, of a market that had been crushing contrarians.

It’s an axiom of short sellers that you can be right about the stock but ruined by the trade. If a stock ends up rising despite the evidence assembled against it, a short can end up taking huge losses—a danger that has led many otherwise risk-addicted financiers to forsake the practice. Every so often, though, a short bet pays off so well that the rest of the world takes notice. In Anderson’s case, that big score was Nikola. In 2020, Hindenburg released a devastating report on the truck-maker, alleging that the company—which at its peak was worth $34 billion—was “an intricate fraud built on dozens of lies.” The report sent Nikola’s stock price plummeting and prompted a criminal investigation that culminated in Milton’s indictment by federal prosecutors in Manhattan this past July. For Anderson, it was the highlight of an astonishing hot streak. Hindenburg had registered five of the top-ten short calls of 2020, according to the research firm Breakout Point.

Although those bets paid off well and Anderson says he’s “been able to make a very good living,” he’s still a small fry by Wall Street standards. He doesn’t manage a fund. He probably could be making more money trading muni bonds. But he’s had a lot more fun on his finance-world capers. Anderson has smoked out scammy cannabis operations. He has investigated alleged ties between a Colombian drug cartel and the owners of a glass company profiting from Miami’s pandemic building boom. For a report on a dubious biotech firm, he infiltrated a sales meeting by feigning a sports injury. He has delved into old-fashioned pump-and-dumps, covid profiteers, and a do-it-yourself orthodontics scheme.

The recent craze in special-purpose acquisition companies—vehicles for businesses to go public via a merger without the usual regulatory oversight—has created a target-rich environment. Take the case of HF Foods Group, which owns warehouses that supply Chinese restaurants across the U.S. In 2020, Anderson published a report alleging that the company’s share price had been pushed up through questionable merger activity as well as a pattern of “highly irregular transactions.” One company subsidiary seemed to have been used to assemble a fleet of Ferraris. Some appeared to sport crude vanity tags (ipull, diktat0r, imhumble) and showed up in the Instagram feed of the chief executive’s son. (HF Foods later disclosed that it is under investigation by the Securities and Exchange Commission; the company did not respond to a request for comment.)

“Nate was the success story of last year,” Carson Block, another well-known activist short, tells me. That success was all the more remarkable in a market that has driven many other shorts, including Block, to the brink of despair. “We can find compelling stories all day long, things that we think are totally fucked up,” Block says. “But it’s a lot harder to get investors to think that it matters.”

After all, you have to be a little crazy to bet against a market that has proved impervious to inflation, supply-chain instability, and a plague that has killed millions of people. You have to be even crazier to do it in defiance of the stresses that come with being a short seller, which can include (in reverse order of annoyance) being yelled at by Jim Cramer, being doxed, being hacked, fending off shadowy private-intelligence firms, defamation lawsuits, and the distinct possibility that, rather than following up on your findings, government regulators will instead start investigating you. And after all that, your warnings may still be ignored or, even worse, trigger a counterreaction among bullish investors that could end up costing you everything.

“Yeah,” Anderson says. “That’s the torture.”

TWO MONTHS AFTER our August meeting, I saw Anderson again, this time in a fifth-floor apartment he uses as an office. Children were playing down in the courtyard, and a brisk breeze carried a glistening bubble past his window. “A lot of investors prefer the market to be sort of this mass hallucination,” Anderson said. On the screen of his laptop, a ticker showed that bitcoin was trading at $63,682.60, heading toward an all-time high. “The market is designed to be a place where these scarce resources of society—capital, labor, materials—are allocated to their most efficient use,” he said. “But it has just become this otherworldly casino, which is disconnected from the real world.”

Anderson, wearing a dark T-shirt, jeans, and polka-dot socks, was fiddling with the wording of a new post to the Hindenburg website. Another researcher was nearby, one of eight full- and part-time employees who work for him. Besides serving as Hindenburg’s headquarters, the apartment is a storage SPACe for three bicycles that belong to him, his fiancée, and his daughter.

Anderson was on the case of Tether Holdings, the company that created a cryptocurrency called tether. Tether is a stable coin, or a unit of crypto that is pegged to something of real-world value— in this case, the U.S. dollar. In theory, each tether is backed by a real dollar held by Tether Holdings, which makes it a useful bit of the infrastructure undergirding the exchange of digital currencies, such as bitcoin and dogecoin. But a recent Bloomberg Businessweek investigation had raised serious questions about how tethered the coins really are, including speculation that a supposedly rock-solid portfolio of some $30 billion in short-term commercial loans might not be real.

Anderson said that Hindenburg had been looking into this possibly phantom portfolio. “From a research perspective, it’s hard to find something that may not exist,” Anderson said. “You have to canvass the world to find something that is not there.” The post on his screen was headlined “Hindenburg Research Announces $1,000,000 Bounty for Details on Tether’s Backing.” The bounty’s terms stated that the firm wanted to know whether tether’s “actual backing may have differed from its public disclosures.”

Short sellers usually play the stock market, but you can theoretically short almost anything that has a fluctuating value, including currencies. (George Soros famously made a fortune by betting against the British pound.) But Anderson said he did not have a direct profit motive for offering the bounty. He claimed he was acting out of curiosity and general principle. “It’s unclear whether it’s something that can be monetized,” he said. “But it’s definitely something we want to solve.” His cursor arrow hovered over the blue button that would publish the post. He clicked.

Anderson said he was anticipating an uproar on Twitter. “It’s going to be an absolute disaster,” he predicted with a note of relish. Sure enough, while the bounty has so far yielded no actionable information, it did trigger a vociferous response from Tether Holdings, which issued a statement calling it a “pathetic” attempt “to discredit not just Tether, but an entire movement.” The company’s CTO tweeted out a meme of “the Tether Truthooooor,” a red-eyed, stubble-bearded weirdo with Hindenburg’s logo superimposed on his forehead. For Anderson, that seemed to be the stunt’s most immediate payoff: eliciting a reaction from the cryptomaniacs on social media that aligned nicely with his firm’s chaotic good brand identity.

Like many shorts, Anderson was drawn to the downside both by personality and by chance. He grew up in Connecticut, where his father was a professor and a family therapist and his mother was a nurse and a teacher. He went to UConn, served as an ambulance medic in Israel, then got into finance, working as an intermediary at boutique firms that connected hedge funds with wealthy individuals. It was in this capacity, around the end of 2014, that a contact asked him to check out a fund called Platinum Partners.

Platinum managed around $1.4 billion and claimed average returns of 17 percent a year—quite good. Anderson, impressed, started investigating. Platinum’s largest holding turned out to be an oil-exploration company that was under a criminal investigation related to a fatal platform explosion. It had also invested in a Florida Ponzi scheme and in an insurer that regulators had accused of seeking to “profit from the imminent deaths of terminally ill patients.”

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