Sino-Forest sues Muddy Waters for defamation

Chinese timber firm Sino-Forest has filed a US$4bn defamation lawsuit against Muddy Waters, the research and investment firm which released a report last year accusing it of fraud.

The news follows Sino-Forest’s announcement last week that it had filed for bankruptcy protection.

“The report was not designed to inform the investing public, but rather to scare them into believing that Sino-Forest was a criminal and fraudulent enterprise," said Sino-Forest in the suit, which was filed in Canada's Ontario Superior Court. It accuses Muddy Waters of misrepresenting facts to benefit its short position in Sino-Forest shares.

Following the publication of Muddy Waters' report last June, which accused Sino-Forest of faulty accounting and overstating the value of its timber holdings, shares of Toronto-listed company lost more than two-thirds of their value before being suspended.

Sino-Forest has since faced investigations by financial regulators in Canada and Hong Kong and by the Royal Canadian Mounted Police.

Sino-Forest is seeking US$4bn in damages from Muddy Waters, its owner Carson Block and 100 other firms it claims traded on the report after receiving advance notice of it.