Highlights

• Citigroup rapidly shifted substantial shareholding status in Arafura Rare Earths Ltd through securities lending agreements within 24 hours.
• Retail investors allege potential market manipulation involving capital raises, short selling, and institutional trading patterns.
• The complex financial movements could potentially impact Australia's critical rare earth project development and supply chain strategy.

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On August 14, 2025, Citigroup Global Markets Australia Pty Limited and affiliates crossed in and out of substantial holding status in Arafura Rare Earths Ltd (ASX: ARU)—first declaring themselves a 5.95% holder on August 13, then lodging a notice the very next day that they had ceased to be a substantial shareholder. The filings reveal movements involving more than 146 million shares through securities lending agreements. Within 24 hours, Citi’s relevant interest fell by over 53 million shares, dropping them below the 5% disclosure threshold.

A similar dynamic occurred in early August.

Securities Lending at the Core

Both filings cite Australian Master Securities Lending Agreements (AMSLA) and similar instruments. These contracts allow Citi to shift large blocks of ARU stock between entities, temporarily transferring voting rights to borrowers. While legal, such lending often fuels short selling—where borrowed shares are sold into the market to drive down price before being repurchased later at a lower level.

Online Chatter—Could there be a Fox in the Hen House?

On the Rare Earth Exchanges (REEx)  investor Forum (opens in a new tab), at least some retail holders suggest the possibility that the ARU share price has been systematically pressured:

• ECE Nolans (Chinese-linked) opted to sell down on-market rather than privately, triggering cascading downward pressure.
• Capital raises managed by Canaccord Genuity allegedly aligned with short sellers’ ability to close positions cheaply, creating suspicion by at least one source that Arafura’s own financiers could be active in the facilitation of trades.
• UBS broker data reportedly shows AU$7.7M in ARU purchases coinciding with short covering—suggesting institutional coordination to help shorts exit without natural market buying.

Note that the above are allegations in the REEx Forum, not substantiated, not validated.

The accusations point to a cycle where every capital raise or index rebalance becomes an opportunity for someone or some persons with knowledge to profit, while long-term retail holders absorb dilution and suppressed valuations.

Critical Questions for Investors

• Did Citi’s rapid disclosure reversal mask short-selling operations rather than true equity investment?
• What are these financial arrangers doing to investigate possible improper behavior?
• Will Canberra shield strategically vital projects like Nolans to ensure a healthy ex-China market.

Bottom Line

With NdPr supply chains central to Western industrial policy, Arafura’s trajectory should be about geology, project execution, and offtake security—not opaque financial engineering. Yet the Citi filings and mounting retail allegations raise the specter that capital market gamesmanship could be delaying or even derailing Australia’s most important rare earth project.

For retail investors, the lesson is clear: watch not only the ore body and offtake deals, but also the shifting shadows of institutional finance.

Sources:

• Citigroup Form 603 – Notice of Initial Substantial Holder, lodged Aug. 20, 2025
• Citigroup Form 605 – Notice of Ceasing to be a Substantial Holder, lodged Aug. 20, 2025
• Rare Earth Exchanges Investor Forum (Apr–May 2025 threads on ARU trading and capital raises)

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