Herbalife Ltd. (NYSE:HLF) has been in a back and forth fight with activist investor Bill Ackman for nearly a year and a half now. Today Ackman fires the next shot in the form of a presentation and panel which journalist Connie Chun was originally slated to moderate. Then she bowed out, saying that she felt like she needed a team of researchers to “fully vet every aspect of this complicated story” and that she didn’t have such a team.

Herbalife

Herbalife responds to Chung’s decision

Within just hours of Pershing Square’s announcement that Chung would not be moderating the panel, Herbalife Ltd. (NYSE:HLF) issued a statement applauding her statement. The nutritional supplements company said her withdrawal indicates that Ackman’s presentation is “misleading propaganda designed to help achieve his ultimate goal of enriching himself by driving down Herbalife’s stock.”

Indeed, it seems that some of the investors who’ve taken positions in Herbalife Ltd. (NYSE:HLF) are now the focus of regulators—who are also scrutinizing the company itself.

Regulators focus on Herbalife investors

A report in The New York Times cites unnamed sources who say regulators with the Securities and Exchange Commission have flagged a number of suspicious trades in connection with the Herbalife Ltd. (NYSE:HLF) controversy. Neither Bill Ackman, who kicked off the debate by shorting the company and calling it a pyramid scheme, nor Carl Icahn, his main opponent, have been accused of wrongdoing.

However, sources told The New York Times that the SEC and the FBI are investigating whether Ackman’s firm Pershing Square Capital Management “improperly encouraged” other investors to short Herbalife Ltd. (NYSE:HLF) right before bad reports about it were publicized, including Ackman’s first announcement about his bet.

No evidence yet

At this point, investigators have reportedly uncovered nothing indicating that anyone has done anything wrong. Pershing Square said it “went to great lengths to avoid any premature disclosure” about its short position in Herbalife Ltd. (NYSE:HLF). However, the sources reportedly said the SEC subpoenaed Pershing Square in connection with an insider trading investigation.

However, that investigation seems to focus on someone who is not with Pershing Square who reportedly bet against Herbalife Ltd. (NYSE:HLF) after learning private information about Ackman’s campaign, potentially before it was made public. Pershing Square itself is not the focus of this investigation.

Herbalife employee may have been connected

The sources said the person who investigators may be focusing on was the roommate of one of the firm’s junior employees, who allegedly told his roommate about Ackman’s plans. That conversation itself may not have been illegal, however, and the Pershing Square employee has not been accused of wrongdoing. The employee may have shared the information in confidence.

Investigators want to know if the roommate did break the law by helping a friend place an order to short shares of Herbalife Ltd. (NYSE:HLF). Sources reportedly said that when Herbalife stock dived after Ackman’s initial presentation, the friend of the roommate allegedly raked in $20,000 or more on that short position.

If investigators do decide to pursue this case, however, it could be a difficult one to prosecute because the relationship between roommates isn’t one which requires confidentiality. However, the roommate could be held liable if he broke a promise to keep the information private.