Foreign Collusion, Naked Shorting (Counterfeiting) & Money Laundering — All Illicit Wealth
SEC proposes tougher “naked” short selling rules
Rachelle Younglai, Richard Chang
Reuters, 4 March 2008
The U.S. Securities and Exchange Commission on Tuesday proposed tougher rules to curb so-called “naked” short-selling abuses and prevent market price manipulation.
SEC Chairman Christopher Cox said regulation SHO, an existing rule partly aimed at short selling abuses, “needs teeth.”
The Simple, Literal Explanation
Patrick Byrne
DeepCapture, 11 February 2008
The “St. Smallcap” example conveyed the dynamics of the manipulation, but it was only a metaphor. This blog will provide an explanation whose truth is more literal.
You and I enter a stock trade. You buy a share of stock from me. You hand over your money, and I hand over the share of stock. That is called, “settlement.”
It may surprise you to learn that there are loopholes in our nation’s regulations that permit some people, when it comes time to settle, to hand over nothing but an IOU. By using one of these loopholes, when the time comes for settlement I can take your money but say, “I’m not delivering you any stock. I’m just giving you an IOU for a share of stock that I will deliver later.”
Jonathan E. Johnson III
The Washington Times, 21 November 2007
In the late 1800s, American financier Daniel Drew refined the art of selling counterfeit shares. Drew’s biographer wrote, “There is no limit to the amount of blank shares a printing press can turn out. White paper is cheap… printer’s ink is also cheap.” Today, it is possible to counterfeit shares electronically — and it happens with such frightening regularity and impunity that Drew would be proud.
Offshore shell games threaten global financial system
Lucy Komisar
The Komisar Scoop, 17 September 2007
There’s an astonishing article in the Washington Post’s Business Section (“Risk. Now They See It. Now You Don’t.“ Sept 16, 2007)
The Post, which has never, ever, railed against tax havens, is now suggesting that their use to cheat tax authorities and investors threatens the entire global financial system. Of course, it doesn’t put it so starkly, but that’s the gist.
Statement of Robert J. Shapiro: The Economic Costs of Tolerating Equity “Failures to Deliver”
Robert Shapiro
11 September 2007
I am Robert J. Shapiro. I am chairman of Sonecon, an economic advisory firm in Washington, D.C., and former U.S. Under Secretary of Commerce for Economic Affairs under President Clinton. I am also a Senior Policy Fellow at the Georgetown University Center for Business and Public Policy and a Senior Fellow of the Progressive Policy Institute. I have served previously as a fellow of Harvard University, the National Bureau of Economic Research, and the Brookings Institution.
PDF (3 pages): Statement of Robert J. Shapiro: The Economic Costs of Tolerating Equity “Failures to Deliver”
Refco: When Smart Money Isn’t So Smart
Matthew Goldstein
Bloomberg, 16 July 2007
The titans of the private equity world fancy themselves smarter, shrewder, and more sophisticated than any one else on Wall Street. Investors have bought into the sentiment as they’ve scooped up the shares of the private equity firms that have gone public recently: Blackstone Group (BX) and Fortress Investment Group (FIG). But a recent report on the spectacular collapse of Refco—the once-dominant commodities broker that was laid waste by a massive accounting fraud—paints an unflattering portrait of the private equity firm that engineered Refco’s August, 2004, leveraged buyout and its initial public offering a year later (see BusinessWeek.com, 7/11/07, “Kill the Private-Equity Tax Break”).
John R. Emshwiller, Kara Scannell
The Wall Street Journal, 5 July 2007
Depository Trust & Clearing Corp. is a little-known institution in the nation’s stock markets with a seemingly straightforward job: It is the middleman that helps ensure delivery of shares to buyers and money to sellers.
SEC moves to close loopholes in short-selling rule
James Langton
Investment Executive, 14 June 2007
The U.S. Securities and Exchange Commission has voted to take additional steps that it believes will close loopholes in its short-selling rule, Regulation SHO, further reducing persistent failures to deliver stock within the standard settlement period.
The SEC voted to adopt final amendments to its rules that, it says, will further reduce fails to deliver in certain equity securities. Regulation SHO, which became fully effective in January 2005, provides a regulatory framework governing short sales of securities.
Overstock attempts to uncover malicious naked shorts
Keith Hahn
Dealbreaker, 25 April 2007
Patrick Byrne, the CEO of Overstock.com, is seeking $3.5bn in damages from 10 prime brokers for intentionally manipulating Overstock’s share price through naked shorting. The big names charged are Bear Stearns, Citigroup, Credit Suisse, Goldman Sachs, Merrill Lynch, and Morgan Stanley.
The Top 25 Moneymakers: The New Tycoons
Institutional Investor, 23 April 2007
This year’s list of 25 top-earning hedge fund managers make, on average, an altogether astonishing $570 million.
SEC seen shy on naked shorting
Bloomberg, 23 April 2007
Critics of short-selling practices they deem abusive are up in arms over what they say is continued inaction by the Securities and Exchange Commission.
They say that the SEC delayed long-overdue reforms last month when it asked for more comments on proposals to tighten up exemptions to a rule intended to curb illegal “naked” short selling.
Goldman to pay $2M to settle SEC case
Associated Press, 14 March 2007
Goldman Sachs Group Inc.’s clearing unit has agreed to pay $2 million in civil penalties to settle allegations that it allowed customers to illegally profit by selling securities short just before public offerings of stock, regulators said.
It marks the first settlement of a Securities and Exchange Commission and NYSE Regulation Inc. case alleging that a prime brokerage firm played a role in a type of abusive short-selling practice that has prompted some companies to launch a high-profile campaign against “naked” short selling. That involves selling borrowed shares without having first borrowed the shares.
Goldman Snared In Naked Shorting Probe
Liz Moyer
Forbes, 14 March 2007
One of Wall Street’s biggest prime brokers has been taken to task by the Securities and Exchange Commission and the Big Board for not catching on to its customers’ illegal trading activities.
Goldman Sach’s clearing and execution division is paying $2 million to settle accusations it relied too heavily on what its customers told it without investigating trading activity that showed signs of something being amiss.
Article: SEC is Looking at Stock Trading
Jenny Anderson
New York Times, 6 February 2007
The Securities and Exchange Commission has begun a broad examination into whether Wall Street bank employees are leaking information about big trades to favored clients, like hedge funds, in an effort to curry favor with those clients, executives at Wall Street banks said.
The inquiry, these people said, seems aimed at determining how pervasive insider trading, or the illegal use of market-moving nonpublic information, may be on Wall Street. Knowledge about a large trade, like the sale of a big block of stock by the mutual fund giant Fidelity, would tell a trader which way the stock would move.
Flames Flare Over Naked Shorts
Dan Mitchell
New York Times, 20 January 2007
UNSUSPECTING readers of certain stock message boards may be forgiven for believing they have stumbled into a flame war among 14-year-old boys. But the increasingly vicious online dispute actually involves, among others, the chief executive of a publicly traded corporation and a longtime business journalist.
The chief executive is Patrick Byrne, who in recent years has taken to asserting that a vast conspiracy of securities traders, journalists and government officials is bent on bringing down the stock of his company, Overstock.com, a peddler of excess inventory. The journalist is Gary Weiss, the author and former BusinessWeek reporter who has made a second career out of ridiculing Mr. Byrne on his blog (garyweiss.blogspot.com).
THE DOLLAR HAS NO INTRINSIC VALUE : DO YOUR ASSETS?
