The closely watched battle of the hedge-fund billionaires over Herbalife is about to get a lot nastier.
Bill Ackman has filed a complaint with regulators against George Soros’ family fund and unidentified co-conspirators alleging Soros’ firm broke insider-trading rules by tipping hedge funds about its purchases of shares in the LA-based multi-level marketing company, The Post has learned.
Soros Fund Management has been trying to use the reputation of the 82-year-old financier to orchestrate a short squeeze against the $1 billion Herbalife short bet of Ackman’s Pershing Square hedge fund, Ackman alleged in a letter to the Securities and Exchange Commission on Friday, according to sources.
Paul Sohn, a portfolio manager at Soros’ firm, who attended so-called “idea meetings” with hedge fund managers during the past month, told them the Soros fund was buying shares of Herbalife and would soon report a nearly 5 percent stake in Herbalife, making it the fund’s third-largest position, a person at the meetings told Pershing Square.
That would give the investors opportunity to make near risk-free profits by trading ahead of the Soros news, according to a source.
“George Soros broke the Bank of England,” Sohn said at one “idea meeting,” one attendee said. “George Soros can break the back of Ackman.”
Last Wednesday, CNBC, citing unnamed sources, reported that Soros had taken a big stake in Herbalife, sending the stock up 9 percent. Soros, according to the cable station, “officially” declined to comment.
“I’m very disappointed with George Soros as I think of him as a humanitarian,” Ackman told The Post. “Instead, his firm is trying to profit off the backs of low-income Latinos who’ve been misled that Herbalife is the answer to the American dream.”
Ackman declined to comment on the SEC complaint.
A Soros firm spokesman declined to comment on the fund’s positions or the allegations. George Soros is chairman of the firm but does not directly get involved in day-to-day operations.
Pershing Square has alleged that Sohn’s “idea talks” with other investors about his fund’s actions constitute insider trading because such disclosures would amount to non-public market-moving information.
Also, when investors work as a group, they have to make a securities filing, or 13D, when holdings reach 5 percent.
The group, according to sources, began to accumulate shares in July, replacing investors who were willing to lend out the stock to short sellers, which pushed up the cost of borrowing stock and the price. It rose almost every day in July, gaining 33 percent that month.
Soros is the fourth billionaire who has waded into the battle over Herbalife since Ackman called it a pyramid scheme last year. Dan Loeb took a big stake in January but sold out when Ackman arch-foe Carl Icahn, who now owns 16.5 percent of Herbalife, announced his investment in February.
Herbalife has denied Ackman’s accusations. Its shares have spiked 95 percent year to date.