The British Columbia Securities Commission has accused a hedge fund manager and financial blogger of fraud involving allegedly false claims about Silvercorp Metals Inc. (TSX:SVM).

Silvercorp’s shares fell 20 per cent after Jon Richard Carnes published a negative report on the company on the financial blog Alfredlittle.com in 2011.

Carnes closed his short position in Silvercorp’s shares by the next day, earning a gross profit of almost US$2.8 million, the regulator says.

“In the notice, staff alleges that Carnes attempted to find a mining expert to support his theory that Silvercorp’s Chinese filings contradicted its North American regulatory filings for the company’s SGX mine, as the Chinese filings had lower production, quality and resource estimates,” the regulator said.

“When two mining experts failed to support his theory and with his put options about to expire, staff maintains that Carnes wrote a false negative report about Silvercorp and published it anonymously on Sept. 13, 2011 on Alfredlittle.com.”

The allegations have not been proven and Carnes said in a emailed response that he “completely” disagreed with them.

“I am completely confident in the outcome and that my name will be clear,” he said, adding that he had retained legal counsel in Vancouver and was preparing a “point-by-point rebuttal of the BCSC’s allegations.”

Silvercorp repeatedly denied any wrongdoing and alleged that it was the victim of a campaign designed to drive down the value of its shares.

A forensic auditor’s report later backed the TSX-traded Chinese miner’s financial statements.

Lorne Waldman, a senior vice-president at Silvercorp, said Thursday the company has waited more than two years for action.

“Silvercorp has sustained great damage to its reputation,” Waldman said. “We’re glad to see there is some action being taken by the regulators to protect the investing public.”

However, Carnes insisted in his email that his reports on Silvercorp “proved to be true” leading to two class action suit by its shareholders.

Silvercorp said back in January that the class actions had been prompted by accusations on the Alfredlittle.com blog, “which have been established as entirely false by the company.”

Silvercorp has mines at the Ying mining district in China’s Henan province and another in Hunan as well as a project under development in Guangdong.