(Reuters) - Federal prosecutors are investigating if short-sellers conspired to drive down stock prices by sharing "damaging" research reports ahead of time and engaging in illegal trading tactics, the Wall Street Journal reported on Wednesday.
The U.S. Justice Department has seized hardware, trading records and private communications in an effort to prove a wide-ranging conspiracy among investors who bet against corporate shares, the report said, citing people familiar with the matter.
Carson Block, the short-seller behind Muddy Waters, was served with a search warrant by an FBI agent in October, the report said, adding that the warrant extended to Block's phones.
Early last year, the Justice Department had issued subpoenas to dozens of companies, which included requests for funds' trading records. It issued a second round of subpoenas in the next few months, Reuters reported in December.
Short-sellers, traders who make profits when stock prices fall, have faced the wrath of sky-high stock markets and also come under extreme scrutiny since the implosion of Archegos and the GameStop (NYSE:GME) trading frenzy last year.