Investor Carl Icahn and his firm Icahn Enterprises LP (NYSE:IEP) have agreed to pay $2 million in penalties to settle charges brought on by the Securities and Exchange Commission (SEC) over his failure to properly disclose billions of dollars worth of stock pledges.
Icahn and IEC failed to disclose information related to Icahn’s pledges of IEP securities as collateral to secure personal margin loans worth billions of dollars under agreements with multiple lenders, the SEC said in a statement on Monday.
Starting in 2018, Ichan pledged between 51% to 82% of IEP’s outstanding securities but failed to disclose this until February 2022.
IEP and Icahn have agreed to pay $1.5 million and $500,000 in civil penalties, respectively, to settle the charges.
“The federal securities laws imposed independent disclosure obligations on both Icahn and IEP. These disclosures would have revealed that Icahn pledged over half of IEP’s outstanding shares at any given time,” Osman Nawaz, Chief of the SEC Enforcement Division’s Complex Financial Instruments Unit, said.
“Due to both disclosure failures, existing and prospective investors were deprived of required information.”
The SEC’s action comes more than a year after short-seller Hindenburg Research alleged Icahn was running a “Ponzi-like” scheme to pay dividends and raised concerns about Icahn’s margin borrowing.
“We are glad to put this matter behind us and will continue to focus on operating the business for the benefit of unit holders,” Icahn told Bloomberg.