“The figure behind Gotham City shares fewer similarities with the
Dark Knight than the world has been led to believe”
– Ben Marlow, journalist with Telegraph UK
Spoiler alert: The Moral of this story is that there are Good Shorts and Bad Shorts. While it has long been accepted that Good Shorts play a highly valuable role in exposing financial malfeasance, it is also true that Bad Shorts can cause serious financial harm. Even worse, a few Bad Shorts can unfairly discredit and jeopardize the entire practice of activist short selling.
The name Gotham Research was once known as a highly respected brand in the realm of activist short selling, one with a unique penchant for exposing bad actors in Europe and the UK. The formerly anonymous short seller had been responsible for taking down such famous frauds as Quindell Plc and Gowex SA and had raised serious and valid concerns about the alleged frauds at highly suspect companies such as Burford, Ebix, and Medifast.
In 2017, Gotham had published a series of scathing short reports alleging many fraudulent practices being carried out around the business Criteo SA, a France-based digital advertising company which trades on the NASDAQ under the ticker CRTO.
However just three weeks ago, Gotham did an about face and published a highly bullish report touting Criteo as having the potential to rocket as high as $120. Gotham Research is no longer anonymous and the author behind it has been known for several years to be Dan Yu, a New York hedge fund analyst. Mr. Yu, of course, is currently long shares of Criteo rather than short and had made some brief favorable references to the company as early as one year ago.
We found this sudden bullishness from Dan Yu to be pretty rich given that in 2017 he had assured the market that Criteo was a highly attractive short trade with a dismal price target of just $12.50.
Aside from the composition of Dan’s portfolio, we are deeply curious to understand what else could possibly have changed so drastically that his new target sits a stonking 860% higher than he had preached to the market not so long ago.
When Gotham was short Criteo, Dan was nothing short of merciless against the company and its management, belting out a chorus line of caustic short reports which contained the most brutal of allegations – but which Dan would very coyly phrase as if they were “questions”.
Gotham’s 2017 short reports against Criteo are still listed on his website at www.gothamcityresearch.com/archive and the links below are to the Dropbox location where he stores the pdf files.
While he was still short the stock in 2017, Mr. Yu began publicly accusing Criteo management of “destroying evidence” while defiantly demanding to know from them “what are you hiding ?”
The invective published by Gotham in 2017 was so vitriolic that Criteo finally hit back, publicly accusing Gotham of publishing false claims.
Then, just as soon as his target showed signs of hitting back, Dan Yu abruptly disappeared into the shadows from whence he came. Many in the short community suddenly found themselves unsure as to which party was really playing the part of “the true fraudster”.
Fast forward almost three years into a stock market which feels as if stocks can only go up and now Dan Yu has returned to put on display his real superpower, that of extra-ordinary intellectual flexibility.
Now that he is long Criteo, Dan Yu has summoned up the courage to proclaim a share price target which is nearly ten fold higher than he had stated when he was short. Now that he is long Criteo – and has no need to worry about lawsuits – Dan feels safe enough to stop finishing his hyperbolic statements with question marks. In fact, now that he is a long biased investor, Dan has taken up the practice of ending his exhortations with Flash Gordan style rocket ships !
Given the volatility taking place around Gotham Research, we decided to produce our own brief report to provide the market with a closer look at Dan Yu, the shadowy figure behind this used-to-be-a-short-selling-outfit.
In the early years, the mysterious author behind Gotham was keen on keeping his name and personal details out of the press, a policy which most readers found to be perfectly understandable. After all, even the most famed and accomplished activist short sellers such as Muddy Waters and (formerly) Citron Research have been known to face brutal retaliation against their efforts to expose financial malfeasance being committed by powerful corporations.
But in connection with a 2014 libel lawsuit, it would come tumbling into the fullest of public view that the author behind Gotham was one Dan Yu, an Asian American man of Korean or Chinese descent living in Staten Island New York.
Sadly, once the name of Dan Yu became public, both he and his Gotham Research brand would soon begin a tragic metamorphosis, transforming into “The Superhero No One Could Believe In”.
The lawsuit had been filed by AIM listed Quindell Plc following a withering short report by Gotham earlier that year. Quindell alleged that Gotham had made false statements which it had failed to even substantiate – similar in many respects to what Criteo would later claim about Gotham in 2017.
Many of the allegations contained in Dan’s Quindell report were not new and had already been thoroughly circulated throughout the hedge fund community in London. Indeed, it would not take long for Quindell to collapse as the massive fraud that it was. Quindell and its auditors ended up facing millions in fines and by 2015, an initial investigation by the Financial Conduct Authority (FCA) was being handed over to the Serious Fraud Office which was investigating the affair as a criminal matter.
Yet rather than face up to fraudulent Quindell to defend the practice of activist short selling and the free speech of others, the author behind Gotham Research was only concerned with protecting himself.
As described on Forbes.com, Gotham’s Dan Yu did not even turn up to defend the lawsuit such that summary judgment was granted to the fraudulent Quindell just a few months after it was filed. As also noted on Forbes.com, as long as Dan had no assets outside the US, he would have little to fear because US courts simply will not enforce such a judgment.
Predictably, Quindell would never obtain its damages nor its costs against Gotham Research, so for Dan Yu, things would be just fine. Yet because Dan forfeited the case, the ruling itself could become a useful precedent for other corporate bad actors – a litigation asset for them to use as part of the contrived legal attacks which are being launched against other short sellers and free speech advocates with ever-increasing frequency.
Following the years of Mysterious Caped Crusader rhetoric that Dan had injected into his media marketing narratives, this “big reveal” was more of a “big let down”, and it was radically different than anything that Gotham’s readers had been led to expect of their erstwhile hero.
Yet Gotham’s true descent into darkness was only just beginning.
Dan has many personal connections to well-connected hedge funds and small time bloggers in Europe and the UK. Accordingly, it was no surprise that just as soon as the identity behind Gotham was about to spill out into the public, a series of well placed “profile articles” began popping up in the UK press, showering Dan and Gotham with some much needed reputation management.
In 2014, The Telegraph put out a glowing profile piece about Dan, dripping with syrupy Batman cliches, in an attempt to craft in the press a heavily scripted Origin Story Narrative to explain how it came to pass that an ordinary mortal like mild-mannered Dan Yu had been transformed into this icon of brilliance, bravery and virtue.
According to his Origin Story Narrative, Dan is an super-cerebral…MIT educated…hedge fund trader… who lives in in New York City…whose great awakening and call to action was when he lost a large sum of money during the 2008 financial crisis….and who now follows in the footsteps of Muddy Waters Carson Block as an activist short seller targeting financial fraud.
Once his character was thus imbued with the appropriate mix of High Street buzz words, Dan’s Origin Story Narrative was set free to proliferate across a multitude of media channels including Bloomberg, The Economist, Reuters, The Telegraph and The Financial Times.
Yet in what could later be viewed as ominous foreshadowing, the Telegraph could be seen telegraphing an ever so subtle warning about some possible chinks in the armor of this would be Dark Knight, saying,
“The figure behind Gotham City shares fewer similarities with the Dark Knight
than the world has been led to believe”
Indeed, it did not take long before public records would come tumbling out, leaving Dan Yu seeming, according to some, more like an ordinary criminal than he does like a superhero.
When looking online, one quickly comes across court filings and police records revealing that this sanctimonious would-be crime fighter Daniel Yu in fact has a criminal record of his own – and has even served time in jail.
Yet in press interviews Dan has rather shamelessly sought to portray himself as as worthy peer on par with the legendary Caped Crusader himself. As per the Daily Mail,
“Yu compares himself to the Caped Crusader, saying he’s driven to show that the world doesn’t belong to ‘untouchable wrong-doers’ …
And in an phone interview with Bloomberg Yu took the self-comparison with Batman even further, adding that,
‘if you pay close attention to Batman, he always worked within the spirit and the letter of the law.’
Well isn’t that just rich for a guy who had been charged criminally with theft, burglary, identity theft and criminal possession of a financial device. Never much of a fighter, Yu pleaded guilty to multiple charges and was sentenced to a three month stretch in a Colorado jail.
Yu would have been released from jail sometime in mid-late 2012, just a few months before Gotham began publishing a series of incendiary short articles alleging fraud against Ebix Corp beginning in February of 2013.
The facts around Dan Yu and Gotham Research bring to light some truisms about short selling which many have recently been coming to terms with. Activist short selling plays a crucial role in exposing fraud and protecting investors, but it is by no means an easy way to make a living. Sadly, there will always be some bad actors who are willing to hijack the publicity potential of activist short selling while harboring very little concern for anyone’s welfare but their own.
Aside from Gotham Research, Dan is also very active on Twitter using the handle @LongShortTrader where his streams of angry tweets indicate that he is hell-bent on holding the world accountable – accountable to a very stringent set of standards which are vastly different than the ones he personally adheres to.
As related in the Daily Mail,
“Online, Yu alternates between discussing weaknesses in the financial markets and tweeting Martin Luther King, Jr, and Bible quotes”.
The Mail then quotes Dan himself as preaching on Twitter that
‘It seems that if one truly cares about justice, one must be equally concerned about plight of poor, oppressed, etc., as the falsely accused,’
Pretty rich indeed, Dan.
From our standpoint, it appears that Dan’s exploitation of the Batman motif is already long past its ‘sell by’ date. We therefore ask, aren’t there any other comic book celebrities who would be a better fit to represent for Dan’s business model ?