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Silvercorp short seller's site says fraud allegations false

Friday, 20 Dec 2013 | 3:26 PM ET

Dec 20 (Reuters) - A website associated with Jon Carnes, a short seller who targeted miner Silvercorp Metals Inc, said on Friday that a Canadian securities regulator that accused him of fraud was wrong.

A new blog post published at Alfredlittle.com and signed "Jon Carnes" said the British Columbia Securities Commission's accusations were "false and without merit."

"I am taking legal action to both defend my reports and to hold accountable those public servants at the BCSC who have ignored my warnings," the post said.

The BCSC said Carnes had published a "false negative report" anonymously on Alfredlittle.com, a site it said he controls.

Investors who take short positions in a company are betting that its shares will drop. Some publish potentially damaging reports about companies after taking up their positions.

Carnes could not immediately be reached for comment. Calls to the New York office of EOS Holdings LLC, a hedge fund the BCSC said Carnes ran, went directly to an answering machine on Thursday and Friday.

Silvercorp is a China-focused miner headquartered in Vancouver and listed on the Toronto and New York stock exchanges.

It was one of several companies with operations in China that were hurt in 2011 by allegations of fraud made by short sellers, who borrow stocks and sell them. If the short sellers can buy the shares back later at a lower price, they turn a profit.

The most high-profile of these companies was Toronto-listed Chinese forestry company Sino-Forest Corp, whose shares have since been delisted.

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