Kyle Bass’ disastrous Hong Kong dollar short has fizzled out. Here’s how

A September SEC enforcement action describes illegal financing of an ambitious start-up that sought to expose corruption involving Chinese government officials

Bass has been bearish on Hong Kong’s currency since at least 2019

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Kyle Bass has long been a China sceptic, a view that he has frequently shared on social media and in media interviews. Photo: Bloomberg

Published: 12:30pm, 14 Oct 2021Updated: 1:03pm, 14 Oct 2021

A recent US Securities and Exchange Commission (SEC) case reveals how Kyle Bass bet against the Hong Kong dollar has fizzled – he has lost big, ensnaring some investors who funded his short through what the regulator said was an illicit stock offering.

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

In June 2020, GTV’s parent company, Saraca Media Group, 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 regulator said. The fund went on to lose more than 95 per cent of the US$30 million it invested, according to the SEC. That hedge fund is managed by Bass’ Hayman Capital Management, said two people with direct 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, Bloomberg has previously reported. The SEC, which said its investigation is continuing, has not accused Bass or Hayman of wrongdoing.

Hayman does not 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 have ever received compensation from the media firm. Tillotson also said information that Bloomberg planned to report was inaccurate. The SEC declined to comment.

Hayman’s investment shows the risks of making big wagers based on geopolitics. It also raises questions about potential conflicts between hedge funds and their clients, said Richard Painter, a former White House ethics official who teaches securities law at the University of Minnesota.

An April 2020 memo describing the GTV stock sale names Bass as a non-executive director of the company, along with Bannon and others, according to a copy of the offering document that was included as part of an ongoing lawsuit that investors filed against Guo. Bass also served as the chairman of a non-profit that Guo founded, according to a document filed with the Internal Revenue Service. In a tweet posted last year, Bass said he was “not a Director of GTV as of July 9th”.

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