Icahn Faces SEC Charges over Hidden Billions in IEP Stock Loans

• Icahn Enterprises and Carl Icahn reached a settlement with the SEC over accusations of not disclosing billions of dollars in personal margin loans secured against the value of their stock.
• Icahn and IELP will pay a combined $2 million in fines without admitting or denying wrongdoing for failing to disclose over $5 billion in margin loans backed by Icahn's stake in the company.
• In 2023, Icahn, a renowned activist investor, was under pressure from another activist short seller.

On Monday, the Securities and Exchange Commission announced that it had fined billionaire activist investor Carl Icahn and his company $2 million, resolving allegations that he had not disclosed the billions of dollars in personal margin loans he had pledged against the value of his stock.

The publicly-traded company that bears Icahn's name settled charges without admitting or denying wrongdoing. They agreed to pay $500,000 and $1.5 million in fines, respectively, the SEC announced in a Monday press release.

Icahn, a corporate raider turned activist investor, promised to acquire between 51% and 82% of Icahn Enterprises shares outstanding to secure billions in margin loans without informing shareholders or regulators.

According to an SEC consent order, Icahn's total personal borrowing was $5 billion.

As the controlling shareholder of IEP, Icahn would have been obligated to submit Schedule 13D filings, which typically outline a controlling shareholder's plans for the company. Additionally, he would have been required to disclose any encumbrances on his stake, such as margin loans.

"Independent disclosure obligations were imposed on Icahn and IEP under federal securities laws, as stated by Osman Nawaz, a senior SEC official. This would have disclosed that Icahn pledged over half of IEP's outstanding shares at any given time."

In May 2023, Hindenburg Research released a report that brought attention to Icahn's margin borrowing. The report put pressure on Icahn Enterprises' stock after accusing the holding company of incorrectly valuing its holdings.

In July, Icahn made changes, combined, and revealed his margin borrowings, as per the SEC's consent order, which was two months after the Hindenburg report.

"Icahn stated in a CNBC interview that the government investigation that ensued led to the settlement, which does not accuse IEP or I of inflating NAV or engaging in a "Ponzi-like" scheme. He added, "We are relieved to put this matter to rest and will concentrate on running the business for the benefit of our shareholders.""

On Monday, Hindenburg Research stated that IEP is still operating a Ponzi-like structure and emphasized that it remains short the stock.

WATCH: IEP shares tumble after firm cuts dividend