Silvercorp Metals Inc. said Friday it is suing a group of detractors for allegedly spreading falsehoods about the company in the hope of profiting from a decline in its share price.

The Canada-based company, which operates in China, said it filed suit in New York City against Chinastockwatch.com, Jerry Katz, Alfredlittle.com, Alfred Little, Simon Moore, and several John Doe defendants with spreading false, defamatory and fraudulent information about Silvercorp on the Internet and in letters to the media and regulators.

In recent months various parties have asserted that Silvercorp falsified production reports and inflated earnings.

Silvercorp charged that the defendants did so to drive down the price of Silvercorp's stock to make their short positions in the stock more profitable.

A short sale is a transaction in which a person sells shares the person does not own, and then borrows the same number shares to deliver when the sale is formally settled. Ultimately, the person buys the shares, hopefully at a much lower price, to cover or pay off the stock loan. A short sale's profitability is determined by how much the stock price drops in excess of the cost of borrowing the stock.

Shares of the company were up 1.47 percent in morning trading.

Silvercorp, which is seeking compensatory and punitive damages, has sued the defendants for defamation, unjust enrichment, trade libel and tortious interference, and deceptive acts and practices. Silvercorp is represented by the law firm of K & L Gates LLP.

This is the first step on our journey to hold participants of this scheme, or those who otherwise defamed the Company, harmed its shareholders and manipulated the capital markets accountable said Dr. Rui Feng, Silvercorp's chairman.

The company has also retained senior legal counsel Leon Getz, Q.C. of the firm of Getz Prince Wells to assist and facilitate the work of legal counsel to the Independent Committee. Additionally, Howard Shapray Q.C. of the firm of Shapray Cramer LLP has been retained to manage related legal matters in Canada.

New York Law firm Canada Investment