US Reaches Settlement with Billionaire Carl Icahn Over Personal Loan Scheme

Billionaire financier Carl Icahn and his company have recently faced serious allegations from U.S. regulators regarding their failure to disclose personal loans amounting to billions of dollars. These loans were secured using the securities of Icahn Enterprises as collateral.

The Securities and Exchange Commission (SEC) announced on Monday that Icahn Enterprises and Icahn have consented to pay penalties of $1.5 million and $500,000, respectively, to resolve the charges against them.

According to the SEC, Icahn had pledged between 51% and 82% of the outstanding securities of Icahn Enterprises as collateral for loans obtained from various lenders since at least December 31, 2018.

Furthermore, the SEC pointed out that Icahn Enterprises did not disclose these pledges in its annual report until February 25, 2022. Icahn also neglected to file necessary amendments to a regulatory filing detailing his personal loan agreements that dated back to at least 2005. Required guaranty agreements were also absent. This failure to comply with reporting requirements persisted until at least July 9, 2023.

Carl Icahn gained notoriety as a corporate raider during the 1980s, particularly for his role in the takeover of Trans World Airlines (TWA). He purchased the airline in 1985, but by 1992, TWA had filed for bankruptcy. Although TWA emerged from bankruptcy the following year, it continued to incur losses and ultimately sold its assets to American Airlines in 2001. In February of this year, Icahn acquired nearly a 10% stake in JetBlue.

Despite the charges, both Icahn and Icahn Enterprises have agreed to cease any future violations and comply with the imposed penalties without admitting to any wrongdoing.

The situation has worsened for Icahn Enterprises, particularly after a report from short-selling firm Hindenburg Research surfaced in May 2023. This report accused Icahn Enterprises of manipulating asset valuations and even suggested the existence of “ponzi-like economic structures” within the holding company, alleging that new investor funds were being used to pay dividends to previous investors.

Icahn responded to the Hindenburg allegations on Monday, asserting that after the firm released a “false report” to profit from its short position, the subsequent government investigation has led to a settlement that does not affirm any claims of inflated asset values or fraudulent practices. He criticized Hindenburg’s tactics as damaging to Icahn Enterprises and its investors, expressing relief at being able to move forward and concentrate on the business’s operation for the benefit of unit holders.

On the day of the SEC’s announcement, shares of Icahn Enterprises fell by over 6%, reflecting the market’s reaction to the news.