Bass burned fingers on HKD short with illicit cash: SEC

Finance | Bloomberg 15 Oct 2021

A recent US Securities and Exchange Commission case reveals how Kyle Bass's bet against the Hong Kong dollar has fizzled: He's lost big, ensnaring some investors who funded his short through what the regulator says was an illicit stock offering.

The details were laid out in a September SEC enforcement action that describes illegal financing of an ambitious startup that sought to expose corruption involving Chinese government officials. The startup - GTV Media Group, with ties to self-professed billionaire Guo Wengui and ex-Donald Trump adviser Steve Bannon - raised US$339 million (HK$2.64 billion) through an unregistered share sale last year, according to the SEC.

In June 2020, GTV's parent Saraca Media transferred US$100 million of the proceeds to an unnamed hedge fund that takes positions in the Hong Kong dollar and other Asian currencies, the SEC said. The fund lost more than 95 percent of the US$30 million it invested, according to the SEC. That fund is managed by Bass's Hayman Capital Management, said two people with knowledge of the matter.

Bass, 52, had been bearish on Hong Kong's currency since at least 2019. At the time of the GTV share sale, Hayman was starting a new strategy to make all-or-nothing wagers that the currency's peg to the US dollar would collapse. The SEC, which said its investigation is continuing, hasn't accused Bass or Hayman of wrongdoing.

Hayman doesn't comment on its investors or its funds, Jeff Tillotson, a lawyer representing Bass and the company said in a statement.

He added that GTV has never invested in Hayman and that neither Hayman nor Bass has ever received compensation from the media firm. Tillotson also said information that Bloomberg planned to report was inaccurate. The SEC declined to comment.

Bass has long been a China skeptic, a view that he's frequently shared on Twitter and in media interviews. He made one of his most audacious bets on the region last year, lining up investors for the Hayman Hong Kong Opportunities Fund, LP-Prodigious Series.

The fund planned to use options to leverage its assets by 200 times to speculate on declines in Hong Kong's dollar, according to a marketing presentation seen by Bloomberg.

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