Crystallex International Corporation’s (AMEX Symbol: KRY) (Price: $3.875) Chairman Robert Fung and Director Robert Nihon have offered only ineffectual denials of Venezuelan Congressman Rafael Rodriquez Acosta’s fraud charges. Mr. Acosta is the President of Venezuela’s Congressional Mining Subcommittee of the Commission of Energy and Mines. Mr. Acosta has accused Crystallex of defrauding investors by making false ownership claims about the Las Cristinas and Carabobo gold concessions. Mr. Acosta has provided material, factual information that is important to investors who are interested in determining whether or not Crystallex owns these concessions. We believe that no responsible corporate officer would advise investors to ignore Mr. Acosta’s statements. Mr. Acosta provided information that the company failed to disclose. Therefore, we believe that Crystallex’s denial of Mr. Acosta’s charges were reckless and against the interest of its shareholders.
The denials are flimsy at best. Mr. Fung stated that “Acosta did exactly the same thing” last year. This is not true. Last year Mr. Acosta made only brief comments about Crystallex’s legal claims and made no statement about the loss of its Carabobo concessions. Mr. Acosta’s earlier statement was made before the Supreme Court which denied Crystallex the right to file a lawsuit over ownership of Las Cristinas. Mr. Acosta has now issued a four page statement and held a press conference. He was joined by a fellow Venezuelan legislator who was involved with the Crystallex investigation. At the conference Mr. Acosta and his colleague answered questions and provided extensive documentation. They spoke about the Las Cristinas decision, the Carabobo investigation and Crystallex’s alleged pending claim. We believe that if Mr. Fung would have merely stated that “Acosta did the same thing” he could be accused of fraudulent misrepresentation. However, Mr. Fung went further by adding “exactly”. We know of no purpose for this obviously false statement but to fraudulently promote Crystallex’s stock.
Mr. Nihon stated that “Acosta has erred in his opinion of what the court will do”. This too is untrue. Mr. Acosta did not offer any opinion “of what the court will do”. Mr. Acosta made statements of fact supported by existing rulings and six official documents. Mr. Acosta offered actual decisions, dates and documents, not opinions. He stated he was correcting Crystallex’s false and misleading statements. Even if Mr. Acosta had given his opinion “of what the court will do”, Mr. Nihon’s statement would still be false. How can Mr. Nihon know “what the court will do” that is necessary to state Mr. Acosta erred?
Mr. Fung also stated that Crytallex’s board is not “dealing with fraud”. This statement has no bearing on the facts. But it is ironic that Mr. Fung has resorted to irrelevant claims of personal legitimacy. There is no legitimate financial basis to support Crystallex’s current market value of approximately $160 million. Because Mr. Acosta’s statements are true and because Crystallex is grossly overvalued, we believe that Mr. Fung’s denial is by its very nature “dealing with fraud”. We believe last week’s stock halt and Mr. Fung and Mr. Nihon’s statements are simply a part of Crystallex’s plot to promote its stock.
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