May 2016 – Financial Treason & Crime

Roger Aitken, 26 May 2016

It’s conjecture as to when the next flash crash might occur. But with the EU Market Abuse Regulation (MAR) coming into force on 3 July 2016, investment firms and operators of trading venues are heading for yet another regulatory change. As if there were not enough regulations and red tape confronting firms from a slew of edicts from Brussels and elsewhere in other jurisdictions.

One could reel off regulatory acronyms such as MiFIR, REMIT to counter market abuse in the energy markets and MAD to name a few. This time though it is with a focus of manipulation of algorithms being labelled as ‘market abuse’.

Driving the latest regulation on top of the welter of others is a need to establish a more uniform and stronger framework in order to preserve market integrity, to avoid potential regulatory arbitrage as well as to ensure accountability in the event of attempted manipulation. Add in providing more legal certainty and – in the view of the legislators – less regulatory complexity for market participants and compliance officers have their hands full. Continue reading “Article: Flash Crashes, Algo Manipulation & Demystifying Market Abuse Regulation”

05/20/201603/09/2021

Article: Overstock founder Patrick Byrne fuels Jonathan Johnson gubernatorial campaign

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Overstock founder Patrick Byrne fuels Jonathan Johnson gubernatorial campaign

Dennis Romboy, 20 May 2016

Overstock.com founder and former CEO Patrick Byrne continues to fuel Jonathan Johnson’s campaign for governor with unprecedented amounts of cash.

Byrne dropped another $250,000 into the Republican candidate’s bank account this week, bringing his total personal contributions to $400,000 so far. He also gave another $200,000 to Johnson’s Promote Liberty PAC, with at least $50,000 of that going to the campaign.

Donations to Johnson, the Overstock board chairman, from other sources since the last reporting period in mid-April total about $47,000, according to financial disclosure reports. Continue reading “Article: Overstock founder Patrick Byrne fuels Jonathan Johnson gubernatorial campaign”

05/18/201605/12/2020

Article: SCOTUS Rules That Lawsuit Alleging Naked Short Selling Can Proceed in State Court

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SCOTUS Rules That Lawsuit Alleging Naked Short Selling Can Proceed in State Court

18 May 2016

In a unanimous decision that may lead to an increase in the trend of state court suits involving securities litigation, the US Supreme Court ruled this week that an action related to the short sale of securities could proceed in state court. In Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, the Court held that the exclusive jurisdiction of securities claims in federal court provided by the Securities Exchange Act is limited to claims “arising under” the Exchange Act.

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05/18/201602/25/2021

Article: CIBC responds to $1M sexual harassment lawsuit launched by ex-worker Diane Vivares

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CIBC responds to $1M sexual harassment lawsuit launched by ex-worker Diane Vivares

The Canadian Press, 18 May 2016

The CEO of CIBC sent a note to all employees Wednesday, reiterating the company’s non-tolerance for workplace harassment after a former worker filed a wrongful dismissal lawsuit against the bank and a former executive director that alleges she was sexually assaulted and harassed. Diane Vivares, a former associate in the bank’s equity markets group, is seeking more than $1 million in damages from CIBC World Markets and Kevin Carter, a former executive director at the bank. In a lawsuit filed with the Ontario Superior Court in December, about two months after she was let go, Vivares alleges Carter sexually assaulted her at a company Christmas party in 2007 by shoving his hand down her skirt twice.
Continue reading “Article: CIBC responds to $1M sexual harassment lawsuit launched by ex-worker Diane Vivares”

05/17/201605/11/2020

Book: Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud

Book

In the depths of the Great Recession, a cancer nurse, a car dealership worker, and an insurance fraud specialist helped uncover the largest consumer crime in American history—a scandal that implicated dozens of major executives on Wall Street. They called it foreclosure fraud: millions of families were kicked out of their homes based on false evidence by mortgage companies that had no legal right to foreclose.

Continue reading “Book: Chain of Title: How Three Ordinary Americans Uncovered Wall Street’s Great Foreclosure Fraud”

05/16/201603/13/2021

Article: Supreme Court Decides Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning

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Supreme Court Decides Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning

Chuck Webber, Jeffrey P. Justman, James G. Martignon, 05 May 2016

On May 16, 2016, the Supreme Court of the United States decided Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning, No. 14-1132, holding that that the “arising under” test for federal-question jurisdiction under 28 U.S.C. § 1331 determines whether federal courts have exclusive jurisdiction under section 27 of the Securities Exchange Act of 1934 (the “Exchange Act”) of lawsuits to enforce liabilities or duties created by that Act. (The Court did not address the portion of section 27 that gives federal courts exclusive jurisdiction of “violations of this chapter or the rules and regulations thereunder” with respect to criminal and regulatory enforcement actions.)

Greg Manning owned stock in Escala Group, Inc., a company traded on the NASDAQ. Between 2006 and 2007, Escala’s share price plummeted and Manning lost most of his investment. Manning blamed Merrill Lynch and other financial institutions for devaluing Escala during that period through “naked short sales” of its stock, under which one borrows stock from a broker and sells it to a buyer on the open market, but never delivers the shares back to the buyer. “Naked” short sales of stock may be designed to drive down a company’s stock price, and are accordingly regulated by Regulation SHO. Continue reading “Article: Supreme Court Decides Merrill Lynch, Pierce, Fenner & Smith Inc. v. Manning”

05/10/201603/01/2021

Article: LAKEWOOD CAPITAL 1Q16 LETTER TO PARTNERS: FOUR SHORT IDEAS

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LAKEWOOD CAPITAL 1Q16 LETTER TO PARTNERS: FOUR SHORT IDEAS

ValueWalk, 10 May 2016

In the quarter ended March 31, 2016, the Lakewood Capital fund recorded a net loss of 0.9%. At quarter end, the fund’s equity exposure was 77.0% long and 44.0% short for a net equity exposure of 33.0%. In addition, the fund was 4.0% long and 0.2% short fixed income securities for a net fixed income exposure of 3.8%.1 The top five positions constituted 23.4% of equity capital and the top ten positions constituted 41.0% of equity capital.

The Lakewood Capital fund generated a net loss of 0.9% in the quarter. Although the fund’s long and short positions on average ended the quarter in roughly the same place they began, the start of 2016 was one of the most volatile and tricky periods we have seen in years as underscored by a 16% mid-quarter decline in the Russell 2000 Index. Defensive sectors like consumer staples, telecommunications and utilities performed very well in the quarter as record low interest rates pushed investors to bid up shares in companies they perceive generate stable cash flows while most other sectors languished. Long equity positions generated a -1% return on capital, hedged long equity positions generated a -5% return on capital, short equity positions generated a +1% return on capital and fixed income positions generated a +2% return on capital.
Continue reading “Article: LAKEWOOD CAPITAL 1Q16 LETTER TO PARTNERS: FOUR SHORT IDEAS”

05/07/201605/22/2020

Web: Overstock.com CEO Patrick Byrne Loses ‘Deep Capture’ Libel Suit

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Overstock.com CEO Patrick Byrne Loses ‘Deep Capture’ Libel Suit

Gary Weiss

gary-weiss.com, 7 May 2016

In a scathing decision released on May 6, a Vancouver court found Byrne and his “Deep Capture” fake news venture had fabricated lurid accusations of criminal conduct against a Vancouver businessman named Aly Nazerali. The damage award consists mainly of punitive and aggravated damages, and the judge found that the conduct of Byrne and his minions was so egregious that he slapped a permanent injunction on the defendants.

I’ve written about Byrne quite a bit in the past because he was the very worst of Corporate America, from his bizarre stock-market conspiracy theories to his well-documented accounting games, which he countered by vicious personal attacks on critics and the media. He is a kind of small-bore Donald Trump, a “born on third base who thinks he hit a triple” kind of guy. Byrne lies so frequently and with such gusto that it’s hard to say if he can distinguish fact from fiction. He is on indefinite leave from Overstock because of a Hepatitis C infection, a disease ordinarily caused by intravenous drug use—or, if you believe him, a wound sewn up by “barefoot doctor in China.”

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05/06/201603/13/2021

Article: SCOTUS Send Merrill Lynch Case to NJ State

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SCOTUS Send Merrill Lynch Case to NJ State

ADAM KLASFELD, 06 May 2016

Merrill Lynch and other brokerage firms must face a state court case that says illegal naked short sales cost investors more than $800 million, the U.S. Supreme Court ruled Monday. The shareholders brought their case four years ago in New Jersey over the Fortune 500 memorabilia company Spectrum Group International, then known as Escala Group. One of the investors, Greg Manning, said “naked short selling” sent his more than 2 million Escala shares into a nosedive. In typical short sales, investors speculate that the price of a stock will decline and purchase securities that they do not currently own in order to profit from the fall. Securities laws and regulations mandate that a short seller borrow the stock it sold and deliver it within four days of sale. Continue reading “Article: SCOTUS Send Merrill Lynch Case to NJ State”

05/02/201603/01/2021

Article: Great Panther Silver Defends Itself Against StreetSweeper Allegations

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Great Panther Silver Defends Itself Against StreetSweeper Allegations

Nicholas Donato, 02 May 2016

Earlier Monday, TheStreetSweeper issued a report saying Great Panther Silver Ltd GPL 0.13% was an overvalued mining company set perfectly to “cave in.” The notable short seller listed six items they believe warrant a drop in current shares.

Enlisting National Inflation Association to promote the stock. Rodman & Renshaw raised their price target from $1.10 to $1.50 per share, and then financed a deal for Great Panther six days later. The lack of institutional interest in the company. StreetSweeper believes it’s “fool-hardy” to risk millions without reserve estimates for any of company’s mines or projects. The market missed a negative news event where the company dropped out of a key project, the Guadalupe de los Reves. StreetSweeper believes even a slight pullback in silver would have a drastic effect on Great Panther stock price.
Continue reading “Article: Great Panther Silver Defends Itself Against StreetSweeper Allegations”