The U.S. attorney's office in Manhattan and the FBI are probing Herbalife, the Financial Times reports, citing unnamed sources familiar with the investigation.
The stock erased its gains for the day. It closed down $8.59, or 14.35%, to end at $51.25 per share.
Herbalife told the FT they are not aware of an investigation.
"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," the company said in a statement to the FT.
Herbalife, a multi-level marketing company that sells weight loss products, has been at the center of a hedge-fund brawl.
Hedge fund manager Bill Ackman of Pershing Square is shorting $1 billion worth of Herbalife, with a price target of $0. He believes the company operates as a "pyramid scheme" that targets lower-income individuals. As a result, he believes regulators, specifically the Federal Trade Commission, will shut it down.
Ackman's long-time rival, billionaire investor Carl Icahn, owns a massive long position in the company. He bought the stock shortly after Ackman publicly revealed his short position. He owns 16.8% of Herbalife's shares.
Herbalife confirmed last month that it's under investigation by the FTC. Howewver, in a statement, the company said that it had no knowledge of an investigation by the FBI or DOJ (read the full statement here).
"We have no knowledge of any ongoing investigation by the DOJ or the FBI," said the statement, "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."
