Muddy Waters, a little known short-selling research and investing outfit in Hong Kong, has had a field day identifying Chinese companies that its founder Carson Block thinks are frauds. 

Block's list of victims include Rino International and China MediaExpress, both of which were delisted after the research appeared. Muddy Waters is likely getting lots of interest from fellow short sellers right now, especially those who are bearish on all those Chinese reverse mergers which are now in the middle of so much controversy.

The latest news, according to Bloomberg, is that Muddy Waters is preparing to release another research report that will likely continue to make the case that Sino-Forest is an epic fraud. But that contention has run into criticism from other analysts, notably analyst Richard Kelertas of Canadian Dundee Securities. Kelertas vehemently disagrees with Mr. Block's allegations and has taken issue with the report, rebutting Block's arguments point-by point.

Kelertas points out that Muddy Waters has been wrong before. For example, it alleged last year that Orient Paper was engaged in a massive fraud. But auditors at Deloitte went in, inspected the company, and Orient Paper came out clean, according to The Globe and Mail. It's stock, however, never recovered. Block is potentially making some powerful enemies. His research on Sino-Forest stuck none other than hedge fund big-wig John Paulson with a $450 million paper loss on the stock in one day. Block, the founder of Muddy Waters, has been telling reporters he's now getting death threats.

For more:
- here's the Bloomberg article
- here's The Globe and Mail article

Related Articles:
China bears poised for massive gains?