NEW YORK (TheStreet) -- The U.S. Department of Justice and Federal Bureau of Investigation have opened a criminal investigation into multi-level supplements-seller Herbalife (HLF), The Financial Times reported late on Friday afternoon.
According to the FT's report, a criminal investigation may not lead to charges and will be led by the U.S. attorney and FBI's New York offices. The FT also said investigators have not charged Herbalife.
Friday's revelation hammered Herbalife shares and comes nearly a month after the company disclosed that the Federal Trade Commission opened a probe into its business practices. That probe was also first reported by the FT.
That move came over a year after hedge funder Bill Ackman of Pershing Square Capital Management took a $1 billion short position in Herbalife's shares and accused the company of being a pyramid scheme.
"We have no knowledge of any ongoing investigation by the DOJ or the FBI, and we have not received any formal nor informal request for information from either agency. We take our public disclosure obligations very seriously. Herbalife does not intend to make any additional comments regarding this matter unless and until there are material developments."
Since Bill Ackman made his short trade and accusations against Herbalife, hedge funders such as Dan Loeb of Third Point Management and Carl Icahn have taken opposing bets. Icahn has emerged as Herbalife's biggest supporter.
After suffering large losses, Ackman amended his Herbalife trade so as to have synthetic short exposure to the company instead of a direct short. At an investor conference earlier this year, Ackman said his potential profit from the Herbalife short has grown. Around that time, Herbalife entered to a share repurchase agreement through a convertible note offering that Ackman said indicated the company might be struggling to obtain bank financing.
He also vowed to continue his fight against the company no matter the near-term performance and compared his trade to a short position in bond insurer MBIA (MBI) that eventually paid off.
Icahn's Board Seats
Billionaire activist Carl Icahn took the opposite of Ackman's trade. In 2013, Icahn cut a deal with Herbalife that gave him seats on Herbalife's board of directors and the right to buy up to 25% of the company's outstanding stock.
In March, Icahn took three additional seats on Herbalife's board amid departures by long-time directors. Icahn also confirmed he continues to hold his approximately 16% stake in Herbalife.
Icahn couldn't be immediately reached for comment on Friday.