August 17, 2012 / 8:00 PM / 6 years ago

Silvercorp's legal attack on hedge fund dismissed

NEW YORK (Reuters) - A New York state judge threw out a lawsuit filed by Vancouver-based Silvercorp Metals Inc against investors who raised questions of potential accounting fraud and misstatements of assets.

New York state Supreme Court Justice Carol Edmead dismissed a defamation complaint brought by Silvercorp (SVM.TO), a China-focused mining company, against New York-based hedge fund Anthion Management, court documents showed on Friday.

The case relates to a 14-page dossier sent anonymously to Canadian securities regulators and select news organizations, including Reuters, on August 29, 2011. The report outlined Anthion’s argument that Silvercorp was engaged in accounting irregularities that meant the company’s share price was over-valued.

“Considering the letters and postings here as a whole, the Court finds they are not actionable,” Edmead said in her decision.

The case was also dismissed against online equity research blog and other defendants.

“We are pleased with the Court’s decision to dismiss Silvercorp’s complaint, which, we maintained was baseless from the outset,” an Anthion spokesperson said in an email.

Attempts to contact Silvercorp’s management were not immediately successful.

Anthion said in March 2012 it had posted, anonymously, copies of a detailed final 17-page report with its supporting materials on September 14 to the website Copies were also sent to Canadian regulators, as well as Silvercorp’s outside auditors.

The author of the reports stated in its materials that the firm held a short position in Silvercorp stock after concluding from its research that there were inconsistencies between financial information that appeared to have been reported by Silvercorp to both Chinese and U.S. regulators.

Anthion acknowledged its authorship of the report in a countersuit filed against Silvercorp in New York State Supreme Court on March 12.

Silvercorp’s stock lost 3.1 percent to C$5.31 on Friday. The share price is down nearly 33 percent from the day prior to Anthion’s original report on August 29 of last year. It had traded at an all-time high of C$15.60 on April 8, 2011.

Additional reporting by Julie Gordon in Toronto; Editing by Dan Grebler

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